Newfield's Proved Reserves in Mid-Continent, Rocky Mountains Up 21%
Newfield's proved reserves at December 31, 2008 were 2.95 Tcfe, an 18% increase over proved reserves at year-end 2007. Newfield replaced nearly 300% of 2008 production with new reserves. Substantially all of the reserve additions were from organic drilling programs. Net negative reserve revisions, due primarily to lower commodity prices at year-end 2008, totaled 66 Bcfe.
Proved reserves in Newfield's two largest divisions -- the Mid-Continent and Rocky Mountains -- increased 21% and now represent about 75% of the Company's total proved reserves. Combined, finding and development (F&D) costs in these two regions averaged $1.91 per Mcfe in 2008, excluding the negative impact of price related reserve revisions and $2.23 per Mcfe including the revisions.
The Company's Mid-Continent division grew proved reserves more than 25% over year-end 2007 levels to approximately 1.4 Tcfe, or nearly 50% of Newfield's total reserves. In the Mid-Continent in 2008, Newfield added 419 Bcfe, excluding price-related revisions. F&D costs in the Mid-Continent were approximately $1.80 per Mcfe, excluding the negative impact of price-related reserve revisions and $2.02 per Mcfe including the revisions.
The Woodford Shale, located in the Arkoma Basin of southeastern Oklahoma, was Newfield's largest investment region in 2008 and will remain so in 2009. Total Woodford production in 2008 increased 65% over 2007 volumes. Gross operated production from the Woodford in early December exceeded the Company's year-end goal of 250 MMcfe/d. Due to longer lateral completions and efficiency gains, Newfield expects to grow its 2009 Woodford production by about 30%, despite running fewer operated rigs.
"The positive benefits of moving from the 'hold the ground' phase in the Woodford to development mode in 2008 is obvious from the improvement in our finding costs in the Mid-Continent," said Lee K. Boothby, Newfield Senior Vice President. "Our drilling and completion costs in 2008, stated on a lateral foot basis, were 38% lower than in 2007. We have drilled about 250 horizontal wells to date and our lateral lengths continue to grow. We now expect that our average lateral length in 2009 will be about 5,000', compared to just 2,428' in 2007 and 4,436' in 2008. This should result in higher initial production rates, greater recoveries per well and improved finding cost metrics."
Newfield invested approximately $2.3 billion in 2008. Total finding and development costs in 2008 were approximately $2.96 per Mcfe, excluding the negative impact of price-related reserve revisions, and $3.31 per Mcfe including the revisions.
Boothby continued, "With the exception of one business unit, all operating areas posted strong reserve growth metrics in 2008. Our Gulf Coast division executed a higher-risk exploration strategy in 2008 and results were well below our expectations. As a result, we have significantly reduced our planned capital expenditures in this region in 2009 (down 70% from 2008 levels), and directed our investments to higher return projects. In addition, due to the timing associated with development plan approvals, we did not book reserves from our recent Dalmatian discovery in the deepwater Gulf of Mexico."
Of Newfield's 2.9 Tcfe of proved reserves at year-end 2008, 62% were proved developed as compared to 63% at year-end 2007.
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