NFR Energy LLC Announces 78% Proved Developed Reserve Growth, 57% Year over Year Production Increase and Provides 2012 Guidance

Mar 05, 2012, 20:34 ET from NFR Energy LLC

HOUSTON, March 5, 2012 /PRNewswire/ -- NFR Energy LLC today announced 2011 year‐end reserves, production and provides 2012 guidance.

David Sambrooks, NFR's Chief Executive Officer, commented on NFR's 2011 results: "2011 was a year of significant progress for NFR. We closed three major consolidating acquisitions in our East Texas core area which, along with good drill bit success, contributed to substantial growth in our production and proved developed reserves. In addition, these acquisitions almost doubled our inventory of quality Cotton Valley horizontal drilling opportunities. We shifted most of our capital spend during the year to the Cotton Valley to take advantage of the economic uplift of the strong liquids component from this resource. Based on our efforts and well results over the past few years, our East Texas asset base of Cotton Valley and Haynesville opportunities is now well understood, secured by production (inventory/acreage substantially held by production), and available for full exploitation, with the development pace entirely determined by natural gas prices. With that accomplished, we have significantly reduced our drilling activity and capital plan for 2012 by dropping from 3 rigs down to 1 rig. In addition, we are pursuing a number of oil and liquids rich opportunities as the next step for the Company, with some promising projects in the current pipeline that should allow us to redistribute a portion of the 2012 capital program as early as the second quarter of this year."

Reserves and Production

Year‐end 2011 proved reserves, as determined by the Company's third‐party reserve engineers and calculated pursuant to SEC guidelines, grew 13% year over year to a record 1.4 Tcfe. Proved reserves consisted of 1.2 Tcf of natural gas, a 5% increase over 2010 and 32 MMbbls oil and NGLs, a 99% increase over 2010. Proved developed reserves increased 78% to 591 Bcfe and represent 43% of the Company's total proved reserves. Based on the Company's 2012 production guidance, the proved reserve life is approximately 25 years. The pre‐tax present value ("PV 10") of the Company's total proved reserves, using a 10% discount rate and year end SEC pricing, is $1.2 billion. An additional 1.3 Tcfe of undeveloped reserves meet the definition of proved reserves but are excluded from the year‐end reserve report as they are not targeted for development within the SEC's mandated five year development window.




Increase / (Decrease)

Proved Developed Reserves (Bcfe)  




Proved Undeveloped Reserves (Bcfe)




Total Proved Reserves (Bcfe) 




Total Proved PV 10 ($ MM) 




% Proved Developed 




% Gas 




% Liquids (Oil / NGLs) 




The Company's 2011 average production rate was 121 MMcfe/day, consisting of:

  • 107 MMcf/day of natural gas, 57% above the 2010 gas production rate
  • 2,397 Bbls/day of total liquids (oil and NGLs), 54% above the 2010 production rate

Operational Update

During 2011, the Company closed two Cotton Valley acquisitions which both had a significant production and proved developed reserve component, contributing to the 78% year‐over‐year increase in proved developed reserves, as well as providing the Company with immediate cash flow.

For 2012 and similar to the second half of 2011 activities, the Company plans to continue to focus its capital program on the Cotton Valley assets due to the oil and NGLs associated with the play. This shift is evidenced by the seven Cotton Valley horizontal wells completed during the fourth quarter of 2011. The seven Cotton Valley completions had an average 30 day initial production rate of 4.8 Mmcfe/d, an estimated ultimate recovery ("EUR") of 4.5 Bcfe and drilling and completion costs of $7.8 million. Additionally, the average NGL yield was 50 barrels per million cubic feet of gas and the average oil yield was 12 barrels per million cubic feet of gas. The Huff 9H, which came online in December 2011, is the Company's best Cotton Valley project to date and is currently producing at 6.5 million cubic feet of gas per day, 230 barrels per day of oil and 418 barrels per day of NGLs.

2012 Guidance

The Company's projected results for 2012 are as follows:

Production & Operating Expense:



  % Increase /



(Decrease) to 2011

Natural Gas (Mmcf/d) 


‐      135



Oil (Bbl/d) 


‐      595



Natural Gas Liquids (Bbl/d)


 ‐   2,575



Total Production (Mmcfe/d) 


‐      154








Total Operating Expense ($ / Mcfe)


 ‐   $2.00







Average Basis Differentials:








Natural Gas (% NYMEX Natural Gas)




Oil (% NYMEX Oil) 




Natural Gas Liquids (% NYMEX Oil)





For 2012, the Company has NYMEX hedges in place on 32 Bcf, almost 70% of its projected natural gas production, at a weighted average price of $6.15 per Mcf. For 2013, the Company has hedge contracts in place for 32.2 Bcf of natural gas production at a weighted average price of $5.23 per Mcf. Additionally, 128 Mbo of 2012 projected oil production is hedged with a floor of $85 per barrel and ceiling of $110 per barrel.

Capital Activity:

The 2012 capital budget has been set at approximately $150 million. Drilling and completion capital is approximately $130 million of the 2012 plan, a 50% decrease from 2011. This reduction in drilling and completion activity is in direct response to current low natural gas prices and the Company's focus on maintaining adequate liquidity. The Company budget reflects plans to run one rig in 2012 and focus activity on drilling Cotton Valley horizontals and the completion of a number of drilled wells that were in inventory at December 31, 2011. The remaining portion of the capital budget will be directed towards new venture projects targeting oil opportunities. The 2012 capital program is flexible and may be adjusted throughout the year in response to the success of the Company's new venture activities.

Conference Call

The Company plans to hold a conference call on March 8, 2012 at 9 A.M. central to discuss fourth quarter and full‐year 2011 results and 2012 guidance. Prior to the call the Company will post its 2011 Annual Report to the Company's website at

To access the conference call, domestic participants should dial 1‐888‐606‐5934. The participant passcode is NFR2011. A replay of the conference call will be available through April 9th via the Company's website at A telephonic replay will be available 24 hours after the call. Participants accessing the telephonic replay should dial 1‐800‐469‐5420.