Monday, February 27, 2012

QEP: Haynesville 2012 Capex to Drop 58%

In releasing its earnings last week, Questar management noted continued strong Haynesville results, but it it indicated that the company will divert most of its 2012 capital spending away from dry gas to liquids and oil production.  QEP's Hayensville capital spending will decrease from approximately $430 million in 2011 to around $180 million in 2012 (lower than previously estimated three months ago), a reduction of 58%.

QEP will continue its one drilling rig program.  Management didn't offer guidance as to whether the rig would be pulled, but I would find it highly unlikely given the capital budget.  The company currently has 18 wells awaiting completion or in the process of being completed.

Additionally, QEP has also seen success with its restricted flow rate program and will continue to choke back its wells.  The downside is that total production volumes are somewhat lower, but the trade-off is worthwhile given the long-term benefits.

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