Announces Sixth Consecutive Quarterly Production Record
Penn Virginia Corporation (NYSE:PVA) today announced record levels of production and provided an update of its oil and gas operational activities, including first quarter 2007 operational results.
Production in the first quarter of 2007 was 8.7 billion cubic feet of natural gas equivalent (Bcfe), or 97.0 million cubic feet of natural gas equivalent (MMcfe) per day, an increase of 20 percent over the 7.3 Bcfe, or 81.1 MMcfe per day, in the first quarter of 2006. Production in the first quarter of 2007 represented the sixth consecutive quarterly production record for the Company and was four percent higher than the previous record of 93.0 MMcfe per day set in the fourth quarter of 2006. The production increase was primarily due to the mid-2006 Mid-Continent acquisition and increases from development drilling efforts in the Cotton Valley play in east Texas, successful exploratory drilling in south Louisiana and development drilling in the Selma Chalk play in Mississippi, partially offset by production decreases in Appalachia and south Texas.
Based on production and drilling program results thus far in 2007, the Company now expects full-year 2007 production to range from 37.0 to 38.5 Bcfe, or 101.3 to 101.5 MMcfe per day, revised from the 36.5 to 38.5 Bcfe of previous guidance provided by the Company. For the month of March 2007, the Company's oil and gas production was approximately 3.1 Bcfe, or 100.2 MMcfe per day. The Company will provide additional guidance in the upcoming first quarter 2007 financial results press release on May 2, 2007.
The Company has budgeted 2007 oil and gas capital expenditures of $334 million, excluding proved reserve acquisitions. During the first quarter of 2007, oil and gas capital expenditures were approximately $97 million, consisting of:
-- $88 million to drill 74 (54.8 net) wells, including: (i) $69 million to drill 67 (51.8 net) development wells, with 66 (50.8 net) successes (a 99 percent success rate); and (ii) $19 million to drill seven (3.0 net) exploratory wells, with four (1.6 net) successful wells (a 57 percent success rate), one (1.0 net) unsuccessful well and two (0.4 net) wells are under evaluation; -- $5 million for the expansion of gathering systems and other production facilities; and -- $4 million for leasehold and property acquisitions, seismic data and other expenditures. First Quarter 2007 Operations Update
Cotton Valley / East Texas - In the Cotton Valley play in East Texas during the first quarter of 2007, the Company drilled 23 (16.5 net) wells, including: (i) 18 (11.5 net) development wells within the Company's area of mutual interest (AMI) with GMX Resources Inc. (NASDAQ: GMXR) and (ii) five exploratory wells outside the AMI within the Company's 100-percent working interest acreage. All of the wells were successful. As a result, production from the Cotton Valley for the first quarter averaged 17.6 MMcfe per day, which represented an increase of 11 percent from the 15.9 MMcfe per day produced in the fourth quarter of 2006 and an increase of 82 percent from the 9.7 MMcfe per day produced in the first quarter of 2006. Five rigs are currently drilling in the play, four in the AMI and one in the 100-percent working interest area. During the second half of 2007, the Company plans to commence drilling of a horizontal Cotton Valley well in the Taylor interval as well as a horizontal well in the Lower Bossier interval.
Selma Chalk / Mississippi - In the Selma Chalk play in Mississippi during the first quarter, the Company drilled 19 (18.9 net) development wells. All of the wells were successful. As a result, production from the Selma Chalk for the first quarter averaged 20.1 MMcfe per day, which represented an increase of five percent from the 19.2 MMcfe per day produced in the fourth quarter of 2006 and an increase of 21 percent from the 16.6 MMcfe per day produced in the first quarter of 2006. The Company actively continues to develop its assets in the Selma Chalk, and currently has two rigs drilling with the possibility of increasing to three rigs later in 2007.
As previously disclosed, the Company has drilled two horizontal Selma Chalk test wells, one in the Gwinville Field and one in the Baxterville Field. In addition, the Company has drilled five 10-acre down-spaced wells in the Baxterville Field. The horizontal wells and the down-spaced wells are under evaluation and the Company expects to determine during the balance of 2007 whether to pursue horizontal drilling, down-spaced drilling, or both, on a routine basis.
Mid-Continent Region - In the Mid-Continent region during the first quarter, the Company drilled 14 (9.1 net) wells, including ten Hartshorne single-lateral horizontal coalbed methane (HCBM) development wells, two Granite Wash development wells and two horizontal Fayetteville Shale exploratory wells. All of the wells were successful. As a result, Mid-Continent production for the first quarter averaged 9.0 MMcfe per day, which represented an increase of 39 percent from the 6.5 MMcfe per day produced in the fourth quarter of 2006. The Company continues aggressive development of the properties it acquired in the Arkoma and Anadarko Basins in June 2006, and currently has two rigs drilling HCBM wells and one rig drilling Granite Wash wells.
As previously disclosed, the Company drilled three horizontal Fayetteville Shale wells in Pope County, Arkansas during the fourth quarter of 2006, with one (0.7 net) successful Company-operated well and two (0.6 net) successful outside-operated wells. In the first quarter of 2007, the Company drilled two (0.9 net) Fayetteville Shale horizontal wells, one (0.7 net) of which was operated by the Company. Both Company-operated wells were stimulated in the first quarter of 2007 and were recently placed on line, with both wells currently cleaning up fluids following fracturing.
Appalachia - In Appalachia during the first quarter, the Company drilled 14 (9.2 net) wells, including: (i) 13 (8.2 net) multi-lateral HCBM development wells and (ii) one (1.0 net) exploratory well. All of the wells were successful except for the exploratory well and one development well, which encountered drilling problems prior to reaching total depth and subsequently was plugged and abandoned. Net production in Appalachia during the first quarter averaged 32.5 MMcfe per day, which represented a decrease of two percent from the 33.0 MMcfe per day produced in the fourth quarter of 2006 and a decrease of eight percent from the 35.3 MMcfe per day produced in the first quarter of 2006. These decreases were the result of natural declines in producing wells as well as shut-in production from 11 HCBM wells due to water disposal issues. Four horizontal rigs and one vertical rig operated by CDX Gas, LLC are currently drilling.
In Appalachia, production delays in the HCBM development program continued during most of the first quarter due to water disposal issues, which were essentially resolved by the end of the quarter. With adequate water gathering and injection well capacity now in place, the Company expects to increase HCBM production due to contributions from previously drilled and shut-in patterns along with HCBM wells to be drilled in 2007. Most of these wells will go through a de-watering period, which will vary in length from well to well, after which we anticipate production will increase over time.
During 2007, the Company plans to conduct a five-well exploratory horizontal drilling program for of the Devonian Shale in West Virginia. The Company will commence drilling of the first well in May.
Gulf Coast - In the Gulf Coast, which includes onshore south Texas and south Louisiana, the Company drilled four (1.2 net) exploratory wells during the first quarter. Two (0.8 net) of the wells were successful and two (0.4 net) of the wells are under evaluation. Daily production for the first quarter of 2007 was 17.7 MMcfe per day, which represented a decrease of three percent from the 18.3 MMcfe per day in the fourth quarter of 2006 and was essentially flat from the 17.8 MMcfe per day in the first quarter of 2006. The decrease from the fourth quarter of 2006 was largely attributable to natural production declines, partially offset by a net increase in production from south Louisiana due to recent exploration success.
The increase in production from south Louisiana is associated primarily with recent discoveries in Bayou Postillion in Iberia Parish, Louisiana. The Cotten Land #1 (0.4 net) well, a fourth quarter discovery, is currently producing approximately 15.4 MMcfe per day (gross). The Cotten Land #3 (0.5) well, a first quarter 2007 discovery, was placed on line in March and is currently producing approximately 28.1 MMcfe per day (gross). Currently the Company's net production from these two wells is approximately 13.7 MMcfe per day. To date, there have been six successful wells drilled in Bayou Postillion and the Company plans to participate in the drilling of two additional wells in 2007. The Company generated the Bayou Postillion prospect, in which Brigham Exploration Company (NASDAQ: BEXP) is the operator during the drilling phase and the Company is operator during the production phase.
The Company participated with a 30 percent working interest in a discovery in the South Creole prospect located in Cameron Parish, Louisiana. The Company has participated in multiple prospects in this field over the past few years, most of which have been successful. The well was recently completed in a Planulina sand with approximately 25 feet of net pay, has a shut-in pressure of approximately 7,400 psi, and is waiting on installation of pipeline and production facilities. We expect the well to be placed on line in May.
The following table shows the Company's current derivative positions for natural gas and oil production:
Weighted Average Price per MMBtu or Bbl Average ------------------------------ Volume Additional Per Day Put Option Floor Ceiling --------- ---------- -------- --------- (MMbtu) Natural Gas Costless Collars Second Quarter 2007 15,000 $7.33 $12.93 Third Quarter 2007 15,000 $7.33 $12.93 Fourth Quarter 2007 11,685 $8.28 $15.78 First Quarter 2008 10,000 $9.00 $17.95 Natural Gas Three-Way Collars* Second Quarter 2007 33,000 $5.00 $7.55 $9.05 Third Quarter 2007 33,000 $5.00 $7.55 $9.05 Fourth Quarter 2007 26,370 $5.25 $7.81 $11.14 First Quarter 2008 22,500 $5.44 $8.00 $12.64 Second Quarter 2008 22,500 $5.00 $7.11 $9.09 Third Quarter 2008 22,500 $5.00 $7.11 $9.09 Fourth Quarter 2008 15,870 $5.21 $7.58 $10.73 First Quarter 2009 10,000 $5.50 $8.00 $12.60 (Bbls) Crude Oil Costless Collars Second Quarter 2007 200 $60.00 $72.20 Third Quarter 2007 200 $60.00 $72.20 Fourth Quarter 2007 200 $60.00 $72.20 Crude Oil Swaps Second Quarter 2007 300 $69.00 Third Quarter 2007 300 $69.00 Fourth Quarter 2007 300 $69.00
* A three-way collar contract consists of a collar contract plus a put option contract sold by the Company with a price below the floor price of the collar. This additional put requires the Company to make a payment to the counterparty if the settlement price for any settlement period is below the put option price. Combining the collar contract with the additional put option results in the Company's entitlement to a net payment equal to the difference between the floor price of the collar contract and the additional put option price if the settlement price is equal to or less than the additional put option price. If the settlement price is greater than the additional put option price, the result is the same as it would have been with a collar contract only. This strategy enables the Company to increase the floor and the ceiling price of the collar beyond the range of a traditional collar contract while defraying the associated cost with the sale of the additional put option.
2007 First Quarter Financial Results Conference Call
The Company separately released its consolidated 2007 first quarter financial results today, and has scheduled a conference call for Thursday, May 3, 2007 at 3:00 p.m. ET. Prepared remarks by A. James Dearlove, President and Chief Executive Officer, will be followed by a question and answer period. Investors and analysts may participate via phone by dialing 1-877-407-9205 five to ten minutes before the scheduled start of the conference call, or via webcast by logging on to the Company's website at www.pennvirginia.com at least 20 minutes prior to the scheduled start of the call to download and install any necessary audio software. A telephone replay of the call will be available until May 17, 2007 at 11:59 p.m. ET by dialing 1-877-660-6853 and using the following replay pass codes: account #286, conference ID #237707. An on-demand replay of the conference call will be available at the Company's website beginning shortly after the call.
Headquartered in Radnor, PA and a member of the S&P SmallCap 600 Index, Penn Virginia Corporation (NYSE: PVA) is an independent natural gas and oil company focused on the exploration, acquisition, development and production of reserves in onshore regions of the U.S., including the Appalachian Basin, the Cotton Valley play in east Texas, the Selma Chalk play in Mississippi, the Mid-Continent region and the Gulf Coast of Louisiana and Texas. PVA also owns approximately 82 percent of Penn Virginia GP Holdings, L.P. (NYSE:PVG), the owner of the general partner and the largest unit holder of Penn Virginia Resource Partners, L.P. (NYSE:PVR), a manager of coal properties and related assets and the operator of a midstream natural gas gathering and processing business. For more information about the Company, please visit the Company's website at www.pennvirginia.com.
Certain statements contained herein that are not descriptions of historical facts are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, the following: the cost of finding and successfully developing oil and gas reserves; energy prices generally and specifically, the price of crude oil and natural gas; projected demand for crude oil and natural gas; the projected supply of crude oil and natural gas; the Company's ability to obtain adequate pipeline transportation capacity for its oil and gas production; non-performance by third party operators in wells in which the Company owns an interest; competition among producers in the oil and natural gas industry; the extent to which the amount and quality of actual production of the Company's oil and natural gas differs from estimated recoverable proved oil and gas reserves; hazards or operating risks incidental to the Company's business; unanticipated geological problems; the availability of required drilling rigs, materials and equipment; the occurrence of unusual weather or operating conditions including force majeure events; delays in anticipated start-up dates of the Company's oil and natural gas production; environmental risks affecting the drilling and producing of oil and gas wells; the timing of receipt of necessary governmental permits by the Company; labor relations and costs; accidents; changes in governmental regulation or enforcement practices; uncertainties relating to the outcome of current and future litigation regarding mine permitting; and risks and uncertainties relating to general domestic and international economic (including inflation and interest rates) and political conditions (including the impact of potential terrorist attacks).
Additional information concerning these and other factors can be found in the Company's press releases and public periodic filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2006. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Source: Penn Virginia Corporation
Released May 2, 2007