Exploration & Production

Panhandle's Eagle Ford, Fayetteville Ops Lift Reserves 36%

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   |    Thursday,November 06,2014

Panhandle Oil and Gas reported estimated total proved reserve volumes for the Company's fiscal year ended Sept. 30, 2014.

2014 Reserve Highlights:

• Total proved reserves increase 36% to 206.2 Bcfe at Sept. 30, 2014
• Proved oil reserves grow 361% principally as a result of the Eagle Ford acquisition
• Proved reserves have grown at a compound annual growth rate of 28% during the last five years

Total Proved Reserves Increase 36%

Panhandle's estimated total proved reserves at Sept. 30, 2014, increased 36% to 206.2 Bcfe from 151.8 Bcfe reported for Sept. 30, 2013, based on SEC mandated pricing. The Sept. 30, 2014, wellhead prices of $4.04 per Mcf of natural gas, $96.94 per barrel of oil and $31.45 per barrel of NGL compare to Sept. 30, 2013, prices of $3.33 per Mcf of natural gas, $89.06 per barrel of oil and $27.28 per barrel of NGL. Panhandle's total estimated proved reserves are approximately 69% natural gas, 22% oil and 9% NGL. The Sept. 30, 2014 and 2013, proved reserves were calculated by the independent petroleum engineering consulting firm DeGolyer and MacNaughton.

The Company's acquisition on June 17, 2014, of producing properties and drilling locations in the Eagle Ford Shale -along with drilling activity over the last few years in several plays in south central and western Oklahoma, the Texas Panhandle and the Fayetteville Shale-resulted in significant increases in oil, NGL and natural gas production and the addition of material new reserves for the Company. During fiscal 2014 the Company's oil reserves increased 361%, NGL reserves increased 88% and natural gas reserves increased 8%. Substantially all of the 5.9 million barrels of proved oil reserves growth in fiscal 2014 can be attributed to the Eagle Ford acquisition. In addition, proved reserves of 971,000 barrels of NGL and 4.9 Bcf of gas were attributable to the Eagle Ford acquisition. In accordance with SEC requirements, 33 undeveloped drilling locations in the Eagle Ford Shale that are considered to be proved reserves from a technical perspective, but are not currently scheduled to be drilled within five years, have been categorized as probable reserves in the Company's 2014 internal probable and possible reserve evaluation which was prepared by DeGolyer and McNaughton. This includes 1.4 million barrels of oil, 211,000 barrels of NGL and 1.1 Bcf of gas. The Company intends to move these reserves to the proved undeveloped (PUD) category when the locations are scheduled to be drilled within five years.

At Sept. 30, 2014, approximately 56% of total proved reserves, or 115.2 Bcfe, are categorized as proved developed as compared to 93.1 Bcfe at Sept. 30, 2013. PUD reserves comprised 44% of total proved reserves, or 90.9 Bcfe, at Sept. 30, 2014, as compared to 39%, or 58.7 Bcfe, at Sept. 30, 2013.

During the last five years, Panhandle's total proved reserves have grown 247% from 59.6 Bcfe to 206.2 Bcfe, a compound annual growth rate of 28%. Funding of this increase in reserves was principally from internally generated cash flow for drilling and bank debt for the Eagle Ford acquisition. The Company has never issued shares in a secondary offering.

Michael C. Coffman, Panhandle's President and CEO, said: "Obviously fiscal 2014 was highlighted by the largest acquisition in Company history.  The purchase of 63 producing wells and 109 undeveloped Eagle Ford locations adds significant oil production and reserves for Panhandle. Even at today's reduced oil prices, drilling on our Eagle Ford properties continues and will create value for the Company. Paired with drilling on the Company's legacy mineral acreage properties, we expect to continue to grow reserves and profitable production in a planned and patient manner, as has been our strategy for many years. Expectations for fiscal 2015 are that approximately 50% of our capital expenditures will go to Eagle Ford development drilling, and the remaining 50% will go to drilling on the Company's legacy mineral acreage properties.

"With our strong financial position, we will deploy the capital necessary to take advantage of those drilling opportunities that are expected to generate profitable growth for Panhandle over the long term."

Paul F. Blanchard, Panhandle's Sr. Vice-President and COO, added: "The Company's Eagle Ford properties are currently being developed with a one rig pad drilling program. The typical process is to drill four to five wells consecutively on a pad and then to complete those wells after the rig moves to another pad. This procedure optimizes cost and efficiency, but results in uneven production as no new wells are placed on production during the drilling process, and then the entire group of newly completed wells is placed on production at virtually the same time.

"The Eagle Ford Shale property produced 825 Boepd net to Panhandle in September, 2014, from 67 wells (61 Eagle Ford, five Pearsall, one Buda). There are an additional seven Eagle Ford wells either being completed or waiting on completion, with one Eagle Ford well currently drilling on the property.

"The Eagle Ford Shale acquisition provides an important element of geographic diversity in the Company's portfolio. In addition to the Company's substantial holdings in conventional resources, we now have extensive assets in five very low- risk shale resource plays including the Eagle Ford, Cana Woodford, SCOOP, Fayetteville and southeastern Oklahoma Woodford. The Eagle Ford also materially contributes to a more balanced product mix for Panhandle and enhances the Company's overall reserve quality. The Company's 2014 proved oil and NGL reserves expanded to 31% of total proved reserves as compared to 13% in 2013 and proved reserves grew to 38% of total 3P reserves versus 29% in 2013.

"Due to its low and predictable cost structure for dry natural gas development, the Fayetteville Shale has been a mainstay of the Company's growth and profitability over the last several years. We believe our newly acquired Eagle Ford Shale properties will provide an additional foundation for the Company's future growth and profitability due to its similar low and predictable cost structure for oil development."