QEP Resources Details Financial Impact of the Blacks Fork Processing Complex

Sep 29, 2011, 16:05 ET from QEP Resources

DENVER, Sept. 29, 2011 /PRNewswire/ -- QEP Resources (NYSE:  QEP) today posted a presentation on its website (www.qepres.com) that provides investors with a financial and operational overview of the company's Blacks Fork Processing Complex in southwest Wyoming.  A new 420 million cubic foot per day (MMcfpd) cryogenic gas processing plant, Blacks Fork II, became operational in mid-July, approximately three months ahead of schedule, and it was completed within budget and without a recordable safety incident.  The plant is currently processing 350 MMcfpd and is recovering approximately 15,000 gross barrels per day (Bpd) of natural gas liquids in a processing configuration that maximizes liquids recovery (RSV mode).  It is expected that at the 420 MMcfpd nameplate processing capacity, the plant will recover approximately 16,500 gross Bpd of natural gas liquids in a processing configuration that maximizes gas throughput (GSP mode).

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The Blacks Fork II plant represents a significant long-term investment in QEP's midstream business in southwest Wyoming.  The Blacks Fork Processing Complex is composed of three processing facilities (NGL extraction plants) with a total of 785 MMcfpd of gas processing capacity:  Blacks Fork I cryo (85 MMcfpd), Blacks Fork II cryo (420 MMcfpd), and Blacks Fork JT (280 MMcfpd – minor liquid recoveries).  This infrastructure is focused primarily on processing growing natural gas production from the Pinedale Anticline, the largest natural gas field in the Rocky Mountain region and one of the lowest cost gas fields in North America.  QEP Energy operates the northern third of the field and about 90% of the QEP-operated Pinedale production is dedicated to QEP Field Services processing facilities for the life of the field.  Pinedale is QEP Energy's single largest asset by net proved reserves and the company has an inventory of up to 1,300 remaining low-risk development drilling locations on its Pinedale leasehold.  

As detailed in the website presentation, the new Blacks Forks II plant and the fee-based processing agreement between QEP Energy and QEP Field Services appreciably enhances the value of QEP's Pinedale asset:

  • At mid-year, QEP Energy booked an additional 47.2 MMBbls of net proved liquids reserves at Pinedale, partially offset by a reduction of 93 Bcf of net proved natural gas reserves to account for processing shrink and fuel, for a net proved reserve addition of 31.7 MMBoe (190 Bcfe).  This is a 6.3% increase over QEP's total year-end 2010 net proved reserves;
  • Based on year-to-date through August 2011 average natural gas and NGL prices, QEP Resources will realize approximately $0.95 per Mcf of incremental value on the gross inlet volume of gas processed at the plant;
  • The website presentation provides an estimate of the EBITDA contribution from the Blacks Fork Processing Complex pre- and post-Blacks Fork II startup.  QEP utilized an interruptible, percent-of-proceeds processing agreement from February through August 2011 with a third party processor that impacted the Blacks Fork Complex financial results during this period.  With the start-up of Blacks Fork II, QEP is now processing 100% of the gas that was previously sent to the third party processor.  At full capacity (estimated to be mid-2013) and assuming year-to-date through August 2011 average natural gas and NGL prices, the Blacks Forks Processing Complex should generate between $140 - $150 MM per year of annualized EBITDA to QEP Resources.  Slide #11 provides a detailed summary;
  • When the Blacks Fork Processing Complex is operating at full capacity, QEP Resources gross incremental liquids recovery is expected to be approximately 16,500 Bpd with net incremental production of approximately 7,600 Bpd (after royalties) to QEP Energy and approximately 6,600 Bpd to QEP Field Services.

In addition to the Iron Horse (in Utah's Uintah Basin) and Blacks Fork II processing plants that have been completed this year, QEP Field Services has identified a number of additional investment opportunities in response to growing QEP Energy and third party development activities.  Details of these projects will be provided in QEP's upcoming Analyst Day scheduled for Monday, November 14th in New York City.  

QEP Resources is a leading independent natural gas and oil exploration and production company with operations focused in the Rocky Mountain and Midcontinent regions of the United States.  QEP Resources also gathers, compresses, treats, processes and stores natural gas.

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 statements regarding: forecasted adjusted EBITDA, production and capital investment for 2011 and related assumptions for such guidance; percentage of net realized production revenues attributed to oil and NGL production; number of rigs planned in operating areas; changes in lease operating expenses; the effects of restricting the flowing rate at the Haynesville Shale; and the capacity of the Blacks Fork II plant and the timing of such plant being fully operational.  Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, but not limited to: the availability of capital; changes in local, regional, national and global demand for natural gas, oil and NGL; shortages of oilfield equipment, services and personnel; operating risks such as unexpected drilling conditions; weather conditions; changes in maintenance and construction costs; the availability and cost of credit; 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, 2010.  QEP Resources undertakes no obligation to publicly correct or update the forward-looking statements in this news release, in other documents, or on the Web site to reflect future events or circumstances.  All such statements are expressly qualified by this cautionary statement.

For more information, visit the QEP Resources internet site at:  www.qepres.com.

SOURCE QEP Resources