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QEP Hits 4.1 Tcfe in Reserves; Sees Increase in South Antelope Value

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QEP Resources Inc. has reported year end 2013 proved reserves for its subsidiary QEP Energy Company, 2013 production and an update to the value of the acquired South Antelope properties located in the Williston Basin of North Dakota.

The Company’s estimated proved reserves, which were prepared by independent petroleum engineering firm Ryder Scott Co. LP, totaled 4.1 trillion cubic feet equivalent (Tcfe) at December 31, 2013, representing a 3% increase from a year ago. Proved crude oil reserves grew 25% from the prior year to 149 million barrels (MMbbl) and represented 22% of total proved equivalent reserves at the end of the year, compared to 18% a year ago. The increase represents a crude oil reserve replacement ratio of nearly 400% in 2013. Proved natural gas reserves declined 3% from 2012 levels while natural gas liquids (NGL) reserves increased 3%. At the end of 2013, the pre-tax PV-10 (present value of net cash flows, after capital expenditures, discounted 10% per year and using prices consistent with Securities and Exchange Commission guidelines) of the Company’s proved reserves was $6.0 billion, a 48% increase from the prior year end.

Included in the Company’s disclosure of estimated proved reserves are production results for 2013. Total equivalent production in 2013 was 309.0 Bcfe and was negatively impacted by weather issues that affected gas production in multiple operating areas in the fourth quarter of the year. 2013 oil production was 10.2 MMbbl which exceeded guidance despite a challenging operating environment in the Williston Basin in the fourth quarter. Natural gas and NGL production for 2013 was 218.9 Bcf and 4.8 MMbbl, respectively.

Chuck Stanley, Chairman, President and CEO of QEP Resources, commented: "While weather issues negatively impacted our fourth quarter natural gas production, we were still able to deliver our targeted oil production growth of over 60% and establish a solid foundation for oil production growth in 2014. Our year-end 2013 reserves demonstrate clear and substantial progress on our strategic repositioning to have a more balanced asset portfolio. We also took steps in 2013 to improve our ongoing capital efficiency by changing well spacing assumptions to yield higher EURs."

South Antelope Acquisition Update

In the fall of 2012, the Company acquired the South Antelope properties in the Williston Basin for approximately $1.4 billion. From the time of the acquisition through the end of 2013, cash capital expenditures have exceeded Adjusted EBITDA from the properties by approximately $100 million. At the end of 2013, the South Antelope proved reserves had a pre-tax PV-10 value of over $2.2 billion, or approximately $700 million above the cumulative net investment through year end 2013. Including probable reserves and associated development costs, the year-end 2013 pre-tax PV-10 value of South Antelope was over $2.8 billion.

Since the acquisition, the Company has been successful in lowering development well costs, de-risking unproven reserves, and increasing production, the number of future drilling locations and its estimate of recoverable reserves. In spite of initial delays due to downstream and weather-related issues, current South Antelope oil production has grown to levels commensurate with the Company’s expectations at the time of the acquisition. Current gross completed well costs have decreased by more than $1 million from estimated costs at the time of acquisition and have averaged approximately $1.5 million less than nearby third-party operated wells in which QEP has an interest.

Stanley added: "Our South Antelope acquisition is a great example of our sound and stringent capital allocation process. We are pleased to see that the assumptions made in our South Antelope acquisition have proven to be accurate and conservative."

QEP Resources Proved Reserves

Year-end total proved reserves were comprised of 2.55 Tcf of natural gas, 148.6 MMbbl of crude oil and 102.6 MMbbl of NGL. Approximately 37% of total proved reserves at year end 2013 were crude oil and NGL compared to 33% at year end 2012, with the increase driven primarily by extensions and discoveries. Extensions and discoveries totaled 783.8 Bcfe, primarily as a result of additions in the Williston Basin and Pinedale. Negative revisions were caused by a change in well spacing assumptions in Pinedale and Haynesville; in an effort to improve capital efficiency, some tightly spaced wells were removed from the Company’s books causing a negative revision while higher EUR, more loosely spaced wells were rebooked as extensions and discoveries.

QEP Energy’s detailed year-end 2013 and 2012 proved reserves are as follows: