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Penn Virginia Corporation Provides Operational Update

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Expanded Position in and Continued Excellent Results from the Eagle Ford Shale

RADNOR, Pa., Aug 03, 2011 (BUSINESS WIRE) -- Penn Virginia Corporation (NYSE: PVA) today provided an update of its oil and gas operations, including second quarter 2011 results.

Highlights

Operational results for the second quarter of 2011 and other operational highlights included the following:

  • Quarterly production of 11.7 billion cubic feet of natural gas equivalent (Bcfe), or 128.6 million cubic feet of natural gas equivalent (MMcfe) per day, a 12 percent increase as compared to 10.5 Bcfe, or 115.1 MMcfe per day in the second quarter of 2010
    • Quarterly oil and natural gas liquid (NGL) production increased to 472 thousand barrels, or 24 percent of total equivalent production, from 224 thousand barrels, or 13 percent of total equivalent production, in the second quarter of 2010
  • Completed and brought on line nine (7.5 net) Eagle Ford Shale wells, for a total of 12 (10.0 net) Eagle Ford Shale wells to date, with an average peak gross production rate of 1,105 barrels of oil equivalent per day (BOEPD)
    • To date, six wells have had a 30-day average gross production rate of 693 BOEPD
    • Current production of approximately 8,000 (5,000 net) BOEPD
  • Three rigs currently drilling the 15th through 17th Eagle Ford Shale wells, with two wells waiting on completion
  • Added approximately 1,200 net acres to the Eagle Ford Shale play in July 2011, bringing total net acreage to approximately 17,800 (13,900 net) acres in Gonzales County, TX with up to 142 identified well locations
  • Third-party pipeline construction is complete, with natural gas gathering and processing in place

Production

Production in the second quarter of 2011 was approximately 11.7 Bcfe, or 128.6 MMcfe per day, a 12 percent increase as compared to 10.5 Bcfe, or 115.1 MMcfe per day, in the prior year quarter and a five percent decrease from 12.2 Bcfe, or 135.2 MMcfe per day, in the first quarter of 2011. As a percentage of total equivalent production, oil and NGL volumes were 24 percent in the second quarter of 2011, as compared to 13 percent in the prior year quarter and 20 percent in the first quarter of 2011. Total product revenues from the sale of natural gas, crude oil and NGLs were $73.0 million, or $6.24 per thousand cubic feet of natural gas equivalent (Mcfe), in the second quarter of 2011, up 39 percent as compared to $52.3 million, or $5.00 per Mcfe, in the second quarter of 2010. Oil and NGL revenues were 48 percent of total product revenues in the second quarter of 2011, as compared to 26 percent in the prior year quarter and 39 percent in the first quarter of 2011.

The year-over-year production increase was due to our new Eagle Ford Shale wells and contributions from 2010 drilling in the horizontal Cotton Valley and Haynesville Shale plays. The 111 percent increase in oil and NGL production as compared to the prior year quarter was due to drilling activity in the Eagle Ford Shale and increased NGL volumes from the Granite Wash. The sequential quarterly decrease in production was attributable primarily to natural gas production declines, partially offset by higher oil and NGL volumes in the Eagle Ford Shale.

Eagle Ford Shale

During the second quarter of 2011, we drilled nine (7.5 net) operated wells in the Eagle Ford Shale, all of which were successful. We currently have three rigs drilling our 15th through 17th wells, two wells that are waiting on completion (WOC) and 12 (10.0 net) wells that are producing approximately 8,000 (5,000 net) BOEPD (see table below).

Cumulative Gross
Production1

Peak Gross Daily
Production Rates1

30-Day Average Gross
Daily Production Rates1

Well Name

Lateral
Length

Frac
Stages

Equivalent
Production

Days On
Line

Oil
Rate

Equivalent
Rate

Oil
Rate

Equivalent
Rate

feet BOE BOPD BOEPD BOPD BOEPD
On-Line Wells
Gardner #1H 4,792 16 96,154 183 1,084 1,247 732 881
Hawn Holt #1H 4,053 15 48,785 87 759 837 606 668
Hawn Holt #2H 4,476 17 35,815 56 869 986 668 728
Hawn Holt #4H 4,106 14 27,585 86 534 582 357 394
Hawn Holt #6H 4,166 17 21,986 57 670 711 342 370
Hawn Holt #9H 4,453 18 50,855 52 1,652 1,877 1,044 1,153
Hawn Holt #10H 3,913 16 25,181 30 1,080 1,188 771 839
Hawn Holt #3H 3,800 15 11,864 20 607 651 --- ---
Hawn Holt #5H 3,950 16 7,371 21 474 528 --- ---
Munson Ranch #1H 4,163 17 18,571 11 1,755 1,921 --- ---
Munson Ranch #3H 3,953 16 14,964 10 1,448 1,538 --- ---
Hawn Holt #11H 3,931 17 8,520 7 1,120 1,190 --- ---
Averages 4,146 16 1,004 1,105 646 719
Maximums 4,792 18 1,755 1,921 1,044 1,153
Minimums 3,800 14 474 528 342 370
Other Wells
Hawn Holt #7H WOC
Hawn Holt #12H WOC
Cannonade Ranch #1H Drilling
Hawn Holt #13H Drilling
Dickson Allen #1H Drilling

1

Wellhead rates only; the natural gas associated with these wells is yielding approximately 150 barrels of NGLs per million cubic feet (MMcf).

We previously announced the success of our initial six wells in the Eagle Ford Shale, which had an average peak gross production rate of 1,040 BOEPD. Our next six wells were brought on line with an average peak gross production rate of 1,169 BOEPD. As detailed in the table above, the discovery well (Gardner #1-H) has cumulative gross production (wellhead) of approximately 85,000 barrels of oil and 67 MMcf of natural gas, or approximately 96 thousand barrels of oil equivalent, after 183 days on line and is still currently producing approximately 350 BOEPD.

In July 2011, we acquired an additional 1,200 net acres in Gonzales County for approximately $4,000 per net acre, increasing our net Eagle Ford Shale leasehold position from 12,700 net acres to 13,900 net acres. Thus far in 2011, we have added 6,500 net acres in Gonzales County for approximately $24 million. We have identified up to 142 horizontal well locations on our current acreage position of approximately 17,800 gross acres. Our full-year 2011 guidance includes up to 34 (27.9 net) wells in 2011, as compared to previous guidance of up to 29 (24.4 net) wells, with up to 23 (18.7 net) wells to be drilled during the second half of 2011. We will attempt to expand our Eagle Ford Shale position in Gonzales County and other areas in the play through additional leasing and selective acquisitions.

Capital Expenditures

During the second quarter of 2011, oil and gas capital expenditures were approximately $105 million, as compared to $116 million in the second quarter of 2010 and $104 million in the first quarter of 2011, consisting of:

  • $95 million for drilling and completion activities, including 19 (12.6 net) wells, 16 (10.4 net) of which were successful, one (1.0 net) of which was unsuccessful and two (1.3 net) of which are WOC
  • $8 million for seismic, pipeline, gathering and facilities
  • $2 million for leasehold acquisitions and other

Other Operations

Granite Wash - During the second quarter of 2011, seven (2.9 net) wells were drilled in the Mid-Continent, including four (1.1 net) successful non-operated wells and one (0.6 net) successful operated Granite Wash well in the South Clinton Field in Washita County, OK, one (0.1 net) successful non-operated Woodford Shale well in Pittsburg County, OK and, as previously disclosed, one (1.0 net) unsuccessful exploratory vertical well in Roberts County, TX.

The initial production results experienced in many recently drilled and completed Granite Wash wells have been less than many of the initial wells drilled in the play. This is primarily the result of a communication issue between wells related to down-spacing and fracturing, which has led to downward adjustments to the type curve and the forecasted production. This issue, together with reduced non-operated drilling activity, has led us to reduce estimated full-year 2011 production from the Granite Wash by approximately 2.7 Bcfe. Even with the reduction of the initial production rates, the economics of the typical well still generate an attractive rate of return.

Further, we recently signed an agreement to sell our Arkoma Basin and other non-core Mid-Continent assets for $30.5 million. As a result, we have further reduced estimated full-year 2011 production in the Mid-Continent by 0.9 Bcfe. Our full-year 2011 guidance includes up to 20 (8.7 net) Granite Wash wells, as compared to previous guidance of up to 21 (9.8 net) Granite Wash wells, with up to 11 (2.4 net) wells to be drilled during the second half of 2011.

Marcellus Shale - During the second quarter of 2011, we drilled three (2.3 net) wells in the Marcellus Shale in Potter County, PA, including two (1.8 net) operated wells and one (0.5 net) non-operated well. One (1.0 net) operated well was completed and two (1.3 net) wells are WOC. We have reduced our 2011 guidance for the Marcellus Shale by six (5.5 net) horizontal wells. As previously disclosed, our recently completed wells failed to meet our expectations, but we plan to test the eastern portion of our acreage position in Potter and Tioga Counties, initially anticipated with vertical wells, commencing in the second half of 2011.

Second Quarter 2011 Financial and Operational Results Conference Call

A conference call and webcast, during which management will discuss second quarter 2011 financial and operational results, is scheduled for Thursday, August 4, 2011 at 10:00 a.m. ET. Prepared remarks by H. Baird Whitehead, President and Chief Executive Officer, will be followed by a question and answer period. Investors and analysts may participate via phone by dialing 1-866-630-9986 five to ten minutes before the scheduled start of the conference call (use the passcode 5475077), or via webcast by logging on to our website, http://www.pennvirginia.com, at least 15 minutes prior to the scheduled start of the call to download and install any necessary audio software. A telephonic replay will be available for two weeks beginning approximately 24 hours after the call. The replay can be accessed by dialing toll free 888-203-1112 (international: 719-457-0820) and using the replay code 5475077. In addition, an on-demand replay of the webcast will also be available for two weeks at our website beginning approximately 24 hours after the webcast.

Penn Virginia Corporation (NYSE: PVA) is an independent oil and gas company engaged primarily in the development, exploration and production of natural gas and oil in various domestic onshore regions including Texas, Appalachia, the Mid-Continent and Mississippi.

For more information, please visit our 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 volatility of commodity prices for natural gas, NGLs and oil; our ability to develop, explore for, acquire and replace oil and gas reserves and sustain production; any impairments, write-downs or write-offs of our reserves or assets; the projected demand for and supply of natural gas, NGLs and oil; reductions in the borrowing base under our revolving credit facility; our ability to contract for drilling rigs, supplies and services at reasonable costs; our ability to obtain adequate pipeline transportation capacity for our oil and gas production at reasonable cost and to sell the production at, or at reasonable discounts to, market prices; the uncertainties inherent in projecting future rates of production for our wells and the extent to which actual production differs from estimated proved oil and gas reserves; drilling and operating risks; our ability to compete effectively against other independent and major oil and natural gas companies; uncertainties related to expected benefits from acquisitions of oil and natural gas properties; environmental liabilities that are not covered by an effective indemnity or insurance; the timing of receipt of necessary regulatory permits; the effect of commodity and financial derivative arrangements; our ability to maintain adequate financial liquidity and to access adequate levels of capital on reasonable terms; the occurrence of unusual weather or operating conditions, including force majeure events; our ability to retain or attract senior management and key technical employees; counterparty risk related to their ability to meet their future obligations; changes in governmental regulation or enforcement practices, especially with respect to environmental, health and safety matters; uncertainties relating to general domestic and international economic and political conditions; and other risks set forth in our filings with the Securities and Exchange Commission (SEC).

Additional information concerning these and other factors can be found in our press releases and public periodic filings with the SEC. Many of the factors that will determine our 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. We undertake 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

Penn Virginia Corporation
James W. Dean
Vice President, Corporate Development
Ph: 610-687-7531
Fax: 610-687-3688
E-Mail: invest@pennvirginia.com

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Penn Virginia Corp's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.