QEP Resources, Inc. (NYSE:QEP) (QEP or the Company) announced today
that the sale of its Pinedale Anticline field assets in Sublette
County, Wyoming (the "Pinedale Divestiture") closed on September
20, 2017. In addition, the Company provided updated 2017 guidance
and 2018 outlook, which included the effect of the Pinedale
Divestiture and the previously announced Permian Basin Acquisition,
and adjustments to the Company's production forecast for its
Williston and Permian basin assets.
"With the Pinedale Divestiture and the pending Permian Basin
Acquisition, we have made significant progress in repositioning the
Company for long-term success," commented Chuck Stanley, Chairman,
President and CEO of QEP. "We have, however, experienced higher
than anticipated production decline from a group of pilot wells
that were completed in deeper benches of the Three Forks Formation
in the Williston Basin and, as a result, we have modified our
development plans going forward. Additionally, we also experienced
some delays in our Permian Basin well completions as a result of
the continuing evolution of our tank-style development
methodology."
"Assuming crude oil prices of $50.00/Bbl and natural gas prices
of $3.00/MMbtu, we expect our 2018 capital investments will more
closely align to our 2018 forecasted cash flows while delivering an
oil production growth rate in the mid-teens compared with our
updated 2017 guidance. Shifting our focus to the development of our
core Permian Basin assets will enable us to drive high-return oil
growth in 2018 and beyond. In addition, we continue to evaluate
steps to further simplify our portfolio through the monetization of
non-core assets, which will provide additional liquidity to help
support future growth."
For 2017, the Company reduced its oil production guidance to a
midpoint of 19.75 MMbbl, natural gas production guidance to a
midpoint of 167.5 Bcf and NGL production guidance to a midpoint of
5.5 MMbbl. See the table below for a detailed update of the
Company's 2017 guidance.
To reflect the Pinedale Divestiture, the Company removed
approximately 0.2 MMbbl of oil, 17.0 Bcf of gas, and 0.3 MMbbl of
NGL from the Company’s 2017 production guidance, which represent
the production contribution from the asset for the remainder of the
year. The Company expects its pending Permian Basin Acquisition to
have minimal effect on 2017 guidance. The remaining adjustments to
2017 guidance are related to the Williston and Permian basin assets
as described below.
Williston Basin
In the Williston Basin, 2017 production has been adversely
affected by three factors: higher than anticipated production
decline on a group of pilot wells in South Antelope; a mechanical
issue associated with three second quarter 2017 South Antelope
completions; and lower than anticipated non-operated production
volumes.
Beginning late in the first quarter 2017, production from a
group of pilot wells in South Antelope began declining at greater
than anticipated rates. The pilot wells were designed to test
spacing density and productivity of the second and third benches of
the Three Forks Formation on a portion of the Company’s South
Antelope acreage. During the third quarter 2017, the Company
concluded that production from these wells was likely being sourced
from overlying horizons rather than from the second and third Three
Forks benches in which the wells were completed. Based on the
performance of these wells and additional log, core and reservoir
analysis, the Company believes it has refined the productive
boundaries of the deeper benches of the Three Forks, which will
guide future development plans. The under-performance of these
pilot wells is expected to result in full year oil production that
is approximately 0.6 MMbbl less than originally forecasted.
The second factor affecting Williston Basin production relates
to a mechanical issue in three South Antelope wells, which began in
the second quarter of 2017. Concurrently, offsetting wells were
shut-in for an extended period of time while the three subject
wells were being repaired. The wells and their offsets have
returned to production and are now producing at or above the rates
originally forecasted; however, the Company expects that the
mechanical issue and the associated offset well shut-ins will
result in full year oil production that is approximately 0.3 MMbbl
less than originally forecasted.
Finally, the Company has seen a decrease in non-operated
activity in the Williston Basin in 2017. The Company expects the
decrease in non-operated production volumes to result in full year
oil production that is approximately 0.3 MMbbl less than originally
forecasted.
Offsetting the negative production variances described above,
the Company has begun testing a refrac program in the Williston
Basin similar to its successful Haynesville program. QEP expects to
complete nine additional refracs during the remainder of 2017,
which combined with four refracs already completed this year, are
expected to contribute 0.3 MMbbl of oil for full year 2017.
The net result of these factors, partially offset by production
gains from the Company's new refrac program, is a reduction of the
Company's forecasted full-year 2017 Williston Basin crude oil
production of approximately 0.9 MMbbl.
Permian Basin
In the Permian Basin, due to shifts in completion timing related
to the evolution of its tank-style completion methodology, the
Company expects to have an approximately one month delay in placing
certain wells on production (POP) in 2017. The Company's 2017
capital investment program in the Permian Basin will not be reduced
as a result of the delay in the POP dates. The Company expects this
shift in timing to reduce full-year 2017 Permian Basin crude oil
production by approximately 0.6 MMbbl.
The Company expects to close its previously announced Permian
Basin Acquisition in October 2017. The updated guidance for 2017
reflects contribution of 635 Boed from existing vertical wells on
the acreage for the last two months of 2017.
Updated 2017 Guidance
The Company’s updated guidance assumes no additional property
acquisitions or divestitures and assumes that QEP will elect to
reject ethane from its produced gas for the entire year where QEP
has the right to make such an election.
2017 Guidance Table |
|
|
2017 |
|
|
2017 |
|
|
Previous Forecast |
Updated Forecast |
Oil production
(MMbbl) |
21.0 - 22.0 |
19.5 - 20.0 |
Gas production
(Bcf) |
182.5 - 192.5 |
165.0 - 170.0 |
NGL
production (MMbbl) |
5.75 - 6.25 |
5.25 - 5.75 |
Total oil equivalent
production (MMboe) |
57.2 - 60.3 |
52.3 - 54.1 |
|
|
|
Lease operating and
transportation expense (per Boe) |
$9.50 - $10.50 |
$10.25 - $10.75 |
Depletion, depreciation
and amortization (per Boe) |
$15.00 - $16.00 |
$14.00 - $15.00 |
Production and property
taxes (% of field-level revenue) |
8.5% |
8.5% |
|
(in millions) |
General and
administrative expense(1) |
$155 - $165 |
$150 - $160 |
|
|
|
Capital investment
(excluding property acquisitions) |
|
|
Drilling, Completion
and Equip(2) |
$970 - $1,010 |
$970 - $1,010 |
Infrastructure |
$70 - $80 |
$70 - $80 |
Corporate |
$10 |
$10 |
Total capital
investment (excluding property acquisitions) |
$1,050 - $1,100 |
$1,050 - $1,100 |
____________________________(1)
General and administrative expense includes approximately $25.0
million of non-cash share-based compensation
expense.(2) Drilling, Completion and Equip includes
approximately $20.0 million of non-operated well completion
costs.
2018 Outlook
Assuming an oil price of $50.00/Bbl and a natural gas price of
$3.00/MMbtu the Company expects 2018 forecasted crude oil
production growth to be in the mid-teens compared with the midpoint
of the updated 2017 guidance. The increase in 2018 forecasted crude
oil production will be primarily driven by oil production growth in
the Permian Basin.
Portfolio Optimization
As part of the Company’s ongoing effort to simplify its
portfolio, QEP is evaluating the sale of certain upstream and
midstream assets and pursuing the monetization of its Central Basin
Platform exploratory project in the Permian Basin.
Derivative Update
The Company continues to add contracts to its derivative
portfolio for oil and gas prices and for crude oil basis. The
following tables present QEP's volumes and average prices for its
open derivative positions as of September 20, 2017:
|
Production Commodity Derivative
Swaps |
|
Year |
|
Index |
|
Total Volumes |
|
Average Swap Price per Unit |
|
|
|
|
(in
millions) |
|
|
|
Oil
sales |
|
|
|
(bbls) |
|
($/bbl) |
2017 |
|
NYMEX
WTI |
|
4.8 |
|
$ |
51.51 |
2018 |
|
NYMEX
WTI |
|
14.2 |
|
$ |
52.42 |
2019 |
|
NYMEX
WTI |
|
2.9 |
|
$ |
50.11 |
Gas
sales |
|
|
|
(MMBtu) |
|
($/MMBtu) |
2017 |
|
NYMEX
HH |
|
24.8 |
|
$ |
2.87 |
2017 |
|
IFNPCR |
|
6.4 |
|
$ |
2.50 |
2018 |
|
NYMEX
HH |
|
105.9 |
|
$ |
2.99 |
2019 |
|
NYMEX
HH |
|
14.6 |
|
$ |
2.87 |
Production Commodity Derivative Gas
Collars |
|
Year |
|
Index |
|
Total Volumes |
|
Average Price Floor |
|
Average Price Ceiling |
|
|
|
|
(in
millions) |
|
|
|
|
|
|
|
|
|
|
(MMBtu) |
|
|
($/MMBtu) |
|
|
($/MMBtu) |
2017 |
|
NYMEX
HH |
|
2.8 |
|
$ |
2.50 |
|
$ |
3.50 |
Production Commodity Derivative Basis
Swaps |
|
Year |
|
Index Less Differential |
|
Index |
|
Total Volumes |
|
Weighted-Average Differential |
|
|
|
|
|
|
(in
millions) |
|
|
|
Oil
sales |
|
|
|
|
|
(bbls) |
|
($/bbl) |
2017 |
|
NYMEX
WTI |
|
Argus
WTI Midland |
|
1.5 |
|
$ |
(0.67) |
2018 |
|
NYMEX
WTI |
|
Argus
WTI Midland |
|
7.7 |
|
$ |
(1.05) |
2019 |
|
NYMEX
WTI |
|
Argus
WTI Midland |
|
1.8 |
|
$ |
(1.01) |
Gas
sales |
|
|
|
|
|
(MMBtu) |
|
($/MMBtu) |
2018 |
|
NYMEX
HH |
|
IFNPCR |
|
7.3 |
|
$ |
(0.16) |
Storage Commodity Derivative Gas
Swaps |
|
Year |
|
Type of Contract |
|
Index |
|
Total Volumes |
|
Average Swap Price per Unit |
|
|
|
|
|
|
(in
millions) |
|
|
|
Gas
sales |
|
|
|
|
|
(MMBtu) |
|
($/MMBtu) |
2017 |
|
SWAP |
|
IFNPCR |
|
1.5 |
|
$ |
1.68 |
2018 |
|
SWAP |
|
IFNPCR |
|
0.4 |
|
$ |
3.05 |
Gas
purchases |
|
|
|
|
|
(MMBtu) |
|
($/MMBtu) |
2017 |
|
SWAP |
|
IFNPCR |
|
1.0 |
|
$ |
2.68 |
About QEP Resources, Inc.
QEP Resources, Inc. (NYSE:QEP) is an independent crude oil and
natural gas exploration and production company focused in two
regions of the United States: the Northern Region (primarily in
North Dakota and Utah) and the Southern Region (primarily in Texas
and Louisiana). For more information, visit QEP's website at:
www.qepres.com.
Forward-Looking Statements
This release includes forward-looking statements within the
meaning of Section 27(a) of the Securities Act of 1933, as amended,
and Section 21(e) of the Securities Exchange Act of 1934, as
amended. Forward-looking statements can be identified by words such
as “anticipates,” “believes,” “forecasts,” “plans,” “estimates,”
“expects,” “should,” “will” or other similar expressions. Such
statements are based on management’s current expectations,
estimates and projections, which are subject to a wide range of
uncertainties and business risks. These forward-looking statements
include, but are not limited to, statements regarding: forecasted
production amounts and growth rates, lease operating and
transportation expense, depletion, depreciation and amortization
expense, general and administrative expense, production and
property taxes, and capital investment, and related assumptions for
such guidance; allocation of capital investment; the timing of the
closing of the Permian Basin Acquisition and the impact of the
acquisition; the number of refracs expected in the Williston Basin;
aligning 2018 capital investments more closely to forecasted cash
flows; expected impacts on and related adjustments to our 2017 and
2018 production; refining of productive boundaries in the Williston
Basin; high-return oil growth from development in the Permian
Basin; monetization of non-core assets and related impacts on cash
flow, liquidity and future growth; the delay in placing wells on
production in the Permian Basin; and adding derivative
contracts. Actual results may differ materially from those
included in the forward-looking statements due to a number of
factors, including, but not limited to: disruptions of QEP's
ongoing business, distraction of management and employees,
increased expenses and adversely affected results of operations
from organizational modifications due to the Pinedale Divestiture
and the Permian Basin Acquisition; the inability of the parties to
satisfy the conditions to the consummation of the Permian Basin
Acquisition; changes in natural gas, NGL and oil prices; liquidity
constraints, including those resulting from the cost or
unavailability of financing due to debt and equity capital and
credit market conditions, changes in our credit rating, our
compliance with loan covenants, the increasing credit pressure on
our industry or demands for cash collateral by counterparties to
derivative and other contracts; global geopolitical and
macroeconomic factors; the activities of the Organization of
Petroleum Exporting Countries; the impact of Brexit; general
economic conditions, including interest rates; changes in local,
regional, national and global demand for natural gas, oil and NGL;
changes in, adoption of and compliance with laws and regulations,
including decisions and policies concerning the environment,
climate change, greenhouse gas or other emissions, natural
resources, and fish and wildlife, hydraulic fracturing, water use
and drilling and completion techniques, as well as the risk of
legal and other proceedings arising from such matters, whether
involving public or private claimants or regulatory investigative
or enforcement measures; strength of the U.S. dollar; elimination
of federal income tax deductions for oil and gas exploration and
development; drilling results; shortages of oilfield equipment,
services and personnel; the availability of storage and refining
capacity; operating risks such as unexpected drilling conditions;
transportation constraints; weather conditions; changes in
maintenance, service and construction costs; permitting delays;
outcome of contingencies such as legal proceedings; inadequate
supplies of water and/or lack of water disposal sources; and the
other risks discussed in the Company’s periodic filings with the
Securities and Exchange Commission, including the Risk Factors
section of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2016 (the 2016 Annual Report on Form 10-K),
and Quarterly Report on Form 10-Q for the quarter ended June
30, 2017. QEP Resources undertakes no obligation to publicly
correct or update the forward-looking statements in this news
release, in other documents, or on the website to reflect future
events or circumstances. All such statements are expressly
qualified by this cautionary statement.
Contact
Investors:
William I. Kent, IRC
Director, Investor Relations
303-405-6665
Media:
Brent Rockwood
Director, Communications
303-672-6999
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