Thursday, November 17, 2011

QEP Details Capital Spending

QEP Resources held its analyst day on Monday and provided details about 2012 and the company's strategy (presentation for southern region, Haynesville starts on page 15).  As indicated last month, the company will see a "significant Haynesville capex (capital expenditure) reduction until gas prices improve.  As with nearly every other domestic producer, QEP will focus on oil and liquids in the near future.  The company expects liquids to rise from 11% of the company's production in 2010 to 20% in 2012.

In the past two years, QEP has budgeted $410 million for capital spending in the Haynesville. In 2012, that figure will drop to $290 million.

Management also spent time explaining Haynesville well economics.  QEP is seeing well costs come down to an average of $9.1 million.  The company is still quite high on the restricted choke technique in which initial production rates are limited to help boost ultimate recoveries.

QEP is booking estimated ultimate recoveries at 6.1 Bcf and with the restricted choke technique is seeing initial decline rates of around 50%, which is considerably better than the 80% companies were seeing in past years.

Bottom line is that the Haynesville represents a very big gas play for QEP, but now that it is no longer trying to hold leases in Louisiana the company is patient enough to let it ride with a lesser capital investment until gas prices improve.

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