Resolute Energy (REN) Updates on Anticipated FY12 Production, Costs, Capital Budget
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Resolute Energy Corporation (NYSE: REN) announced its 2012 capital budget and issued guidance concerning anticipated production and costs for 2012. Resolute also provided detail on its year-end 2011 reserves and production.
The following guidance is subject in its entirety to all the cautionary statements and qualifications described below and under the caption "Forward-Looking Statements."
Capital ExpendituresResolute expects to invest between $180 and $190 million in 2012 for its base development activities. Approximately 65% of the base capital budget is targeted for drilling and completion activities; 27% for infrastructure, facilities and well work in support of the expansion of CO2 flood projects in Aneth; and 8% for the purchase of CO2.
The Company intends to fund the 2012 capital program from cash flow generated from operations and borrowings on Resolute's revolving credit line which had an unused borrowing base of $157 million as of year-end 2011. If the Company decides to accelerate activities, they may be funded in part through joint venture arrangements or capital markets transactions.
The Company has strong liquidity, thus capital outside the base development budget could be available for acquisitions and for activities on its high-potential inventory including its Turner, Niobrara and Mowry projects in Wyoming and its Paris drilling project in North Dakota. Whether any one or more of these activities are pursued during 2012 will depend on further scientific work, including interpretation of the Powder River Basin 3D dataset and well results, both by Resolute and other companies operating in these areas.
Resolute will evaluate its capital expenditures in relation to its cash flow and may adjust its activity and capital spending levels based on changes in commodity prices, the cost of goods and services, production results and other considerations.
ProductionThe Company estimates that full-year production for 2012 will be approximately 3.25 to 3.45 million Boe ("MMBoe"). The midpoint of 2012 production guidance represents a 15% increase from full-year 2011 production of 2.92 MMBoe. On a revenue weighted basis, approximately 96% of Resolute's production is expected to come from sales of oil and natural gas liquids ("NGL"), while on a volume weighted basis, approximately 87% is expected to be attributed to oil and NGL.
Lease Operating ExpenseResolute projects annual cash lease operating expenses ("LOE") for 2012 to be between $60 million and $65 million. Higher production contributions from lower-cost operations in the Bakken area and the Permian Basin contribute to an LOE forecast that is lower on a unit basis than that achieved during 2011. Production taxes are expected to be 13.5% to 14.5% of 2012 production revenue, consistent with prior years.
General & Administrative ExpenseResolute anticipates that annual general and administrative expense for 2012 will be between $14 million and $17 million, excluding non-cash stock-based compensation expense.
Depletion, Depreciation and AmortizationResolute anticipates that its DD&A rate for 2012 will be approximately $20.00 to $21.00 per Boe of production.
Hedging: Resolute has derivatives in place for 2012 covering aggregate average daily oil volumes of 4,125 barrels of oil per day ("Bopd"). Sixty seven percent of that volume (2,750 Bopd) is covered by swaps with an average strike price of $69.40 and the remaining volumes (1,375 Bopd) are covered by collars with an average floor of $71.64 and an average cap of $102.45 per barrel. A NYMEX weighted average price of $90.00 per barrel would yield a weighted average price to the Company of $76.27 per barrel. The Company also has in place swaps covering daily gas volumes of 2,100 million British thermal units (MMBtu) per day at NYMEX weighted average prices of $7.42 per MMBtu, and 2,800 MMBtu per day of Wyoming basis gas hedges at $1.56 per MMBtu. These derivatives provide price protection on approximately 50% at the midpoint of 2012 oil production guidance and 40% at the midpoint of 2012 gas production guidance.
Proved reserves: At December 31, 2011, Resolute's estimated proved reserves totaled 64.80 MMBoe, essentially equivalent to year-end 2010 proved reserves of 64.67 MMBoe. Approximately 82% of the Company's 2011 year-end proved reserves were classified as crude oil and 43% were undeveloped.
In 2011, the Company added approximately 7.60 MMBoe of proved reserves from operational activities and reserve acquisitions. This was offset by production of 2.92 MMBoe, divestitures of 0.29 MMBoe and downward revisions in reserves totaling 4.25 MMBoe, for a net reserve gain of 0.13 MMBoe. The downward revisions were comprised of: (1) an elimination from the proved category of certain gas infill wells in Hilight Field, (2) a decrease in reserves attributable to the future Aneth membrane plant due to operational and timing considerations and (3) the decision to plug and abandon coalbed methane wells in Hilight Field. All three of these revisions were substantially influenced by the current low product price environment for natural gas.
The present value of the Company's estimated future net revenues from proved reserves, excluding income taxes (a non-GAAP financial measure), was estimated to be $1.14 billion as of December 31, 2011, using Securities and Exchange Commission pricing guidelines for year-end 2011 discounted at 10% ("PV10"). The year-end pricing used in calculating the present value averaged $89.95 per barrel of oil and $3.411 per thousand cubic feet of natural gas (as adjusted for differentials and natural gas liquids content, and excluding the impact of existing hedges).
The following guidance is subject in its entirety to all the cautionary statements and qualifications described below and under the caption "Forward-Looking Statements."
Capital ExpendituresResolute expects to invest between $180 and $190 million in 2012 for its base development activities. Approximately 65% of the base capital budget is targeted for drilling and completion activities; 27% for infrastructure, facilities and well work in support of the expansion of CO2 flood projects in Aneth; and 8% for the purchase of CO2.
The Company intends to fund the 2012 capital program from cash flow generated from operations and borrowings on Resolute's revolving credit line which had an unused borrowing base of $157 million as of year-end 2011. If the Company decides to accelerate activities, they may be funded in part through joint venture arrangements or capital markets transactions.
The Company has strong liquidity, thus capital outside the base development budget could be available for acquisitions and for activities on its high-potential inventory including its Turner, Niobrara and Mowry projects in Wyoming and its Paris drilling project in North Dakota. Whether any one or more of these activities are pursued during 2012 will depend on further scientific work, including interpretation of the Powder River Basin 3D dataset and well results, both by Resolute and other companies operating in these areas.
Resolute will evaluate its capital expenditures in relation to its cash flow and may adjust its activity and capital spending levels based on changes in commodity prices, the cost of goods and services, production results and other considerations.
ProductionThe Company estimates that full-year production for 2012 will be approximately 3.25 to 3.45 million Boe ("MMBoe"). The midpoint of 2012 production guidance represents a 15% increase from full-year 2011 production of 2.92 MMBoe. On a revenue weighted basis, approximately 96% of Resolute's production is expected to come from sales of oil and natural gas liquids ("NGL"), while on a volume weighted basis, approximately 87% is expected to be attributed to oil and NGL.
Lease Operating ExpenseResolute projects annual cash lease operating expenses ("LOE") for 2012 to be between $60 million and $65 million. Higher production contributions from lower-cost operations in the Bakken area and the Permian Basin contribute to an LOE forecast that is lower on a unit basis than that achieved during 2011. Production taxes are expected to be 13.5% to 14.5% of 2012 production revenue, consistent with prior years.
General & Administrative ExpenseResolute anticipates that annual general and administrative expense for 2012 will be between $14 million and $17 million, excluding non-cash stock-based compensation expense.
Depletion, Depreciation and AmortizationResolute anticipates that its DD&A rate for 2012 will be approximately $20.00 to $21.00 per Boe of production.
Hedging: Resolute has derivatives in place for 2012 covering aggregate average daily oil volumes of 4,125 barrels of oil per day ("Bopd"). Sixty seven percent of that volume (2,750 Bopd) is covered by swaps with an average strike price of $69.40 and the remaining volumes (1,375 Bopd) are covered by collars with an average floor of $71.64 and an average cap of $102.45 per barrel. A NYMEX weighted average price of $90.00 per barrel would yield a weighted average price to the Company of $76.27 per barrel. The Company also has in place swaps covering daily gas volumes of 2,100 million British thermal units (MMBtu) per day at NYMEX weighted average prices of $7.42 per MMBtu, and 2,800 MMBtu per day of Wyoming basis gas hedges at $1.56 per MMBtu. These derivatives provide price protection on approximately 50% at the midpoint of 2012 oil production guidance and 40% at the midpoint of 2012 gas production guidance.
Proved reserves: At December 31, 2011, Resolute's estimated proved reserves totaled 64.80 MMBoe, essentially equivalent to year-end 2010 proved reserves of 64.67 MMBoe. Approximately 82% of the Company's 2011 year-end proved reserves were classified as crude oil and 43% were undeveloped.
In 2011, the Company added approximately 7.60 MMBoe of proved reserves from operational activities and reserve acquisitions. This was offset by production of 2.92 MMBoe, divestitures of 0.29 MMBoe and downward revisions in reserves totaling 4.25 MMBoe, for a net reserve gain of 0.13 MMBoe. The downward revisions were comprised of: (1) an elimination from the proved category of certain gas infill wells in Hilight Field, (2) a decrease in reserves attributable to the future Aneth membrane plant due to operational and timing considerations and (3) the decision to plug and abandon coalbed methane wells in Hilight Field. All three of these revisions were substantially influenced by the current low product price environment for natural gas.
The present value of the Company's estimated future net revenues from proved reserves, excluding income taxes (a non-GAAP financial measure), was estimated to be $1.14 billion as of December 31, 2011, using Securities and Exchange Commission pricing guidelines for year-end 2011 discounted at 10% ("PV10"). The year-end pricing used in calculating the present value averaged $89.95 per barrel of oil and $3.411 per thousand cubic feet of natural gas (as adjusted for differentials and natural gas liquids content, and excluding the impact of existing hedges).
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