Penn Virginia reported record levels of proved oil and gas reserves and production and provided an update of its oil and gas operations, including full-year and fourth quarter 2009 results, guidance and liquidity.
Full-Year and Fourth Quarter 2009 Highlights
Operational results for our oil and gas segment for the year ended December 31, 2009 included the following:
Operational results for our oil and gas segment during the fourth quarter of 2009 included the following:
A. James Dearlove, President and Chief Executive Officer, said, "During 2009, we were able to achieve a record level of production and grew our proved reserves in spite of sharply lower natural gas prices and capital expenditures that were less than a third of those incurred in 2008.
"As the natural gas price environment appears to have stabilized in late 2009 and early 2010, we began to increase our drilling activity in two core areas, the Granite Wash and the Lower Bossier (Haynesville) Shale, which deliver solid returns. As the result of this resumed drilling, and assuming gas prices do not decrease significantly again, we expect to reverse recent quarterly production declines and deliver sequential production growth during 2010, setting the stage for more meaningful growth in 2011. We also bolstered our cash liquidity during 2009 and early 2010 with new financing and divestitures, providing more liquidity than needed to conduct our planned activities. While we expect higher levels of capital expenditures in 2010 to support our plan, we will continue to monitor natural gas prices and will remain flexible as to our spending levels as 2010 progresses.
"We have a multi-year inventory of high-quality drilling projects in some of the best domestic unconventional and resource plays and we have ample capital resources to develop these projects at the appropriate pace depending on market conditions. Our horizontal drilling success and increased production in these plays over the past two years has positioned us for relatively low-risk, high-return growth in both production and reserves in coming years."
Full-Year 2010 Guidance and Liquidity Updates
Full-year 2010 guidance and liquidity highlights are as follows:
As discussed further in our operational update below, currently anticipated oil and gas capital expenditures for 2010 include approximately $300 million for drilling wells in our horizontal Granite Wash, Lower Bossier Shale, Selma Chalk and Cotton Valley development plays and to test wells on our Marcellus shale leasehold position. In addition, we plan to spend approximately $80 million for leasehold acquisition, primarily in the Marcellus Shale and Granite Wash plays. We plan to release additional 2010 guidance details in a separate fourth quarter and full-year 2009 financial results press release on February 10, 2010.
2009 Proved Reserves, Production and Capital Expenditures
Proved reserves increased three percent to a record 942 Bcfe at year-end 2009 from 916 Bcfe at year-end 2008. Natural gas comprised approximately 83 percent of year-end proved reserves and 46 percent of the reserves were proved developed. Excluding price revisions, which reduced reserves by 63 Bcfe, we replaced 285 percent of our 2009 production by adding approximately 145 Bcfe of proved reserves from extensions, discoveries and additions, net of other revisions. The reserve increases were primarily attributable to the Granite Wash, Lower Bossier Shale and Selma Chalk, with decreases in the Cotton Valley and royalty properties in Appalachia. Capital expenditures related to exploration and development, as well as leasehold acquisition, were approximately $172 million, or $1.18 per Mcfe of proved reserves added, excluding price revisions. Pro forma for the Gulf Coast divestiture, proved reserves increased four percent and, excluding price revisions, our reserve replacement ratio was 321% and our reserve replacement cost was $1.18 per Mcfe.
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