Resolute Energy plans to drill 22 gross wells in the Permian in 2017
Denver-based Resolute Energy Corp. (ticker: REN) released its third quarter results this week, reporting a loss of $18.9 million for the quarter, and highlighting the company’s plans for 2017. The company is focusing on drilling in the Permian Basin next year, with a two-rig program designed to drill 22 gross (20.8 net) wells, the company said in its press release.
In the company’s conference call, Resolute CEO Nicholas Sutton indicated that the company is currently testing 80-acre spacing, which will inform the company on its inventory of more than 300 potential Wolfcamp A and Wolfcamp B wells in the Delaware Basin.
“The compelling results from our Permian Basin drilling program have encouraged our board of directors to preliminary approve a two-rig program for 2017,” said Sutton on the call. “We expect this program to substantially secure all of our Delaware Basin acreage as held by production. And if the results of our 2016 program are indicative of the future, the 2017 plan has the potential to almost double our average production in 2017 as compared to 2016,” he added.
In October, the company announced it had entered into an agreement with Firewheel Energy LLC to acquire 3,293 acres of oil and gas properties in Reeves County, Texas, for $135 million. The deal allowed Resolute to add to its Permian acreage and will allow the company to continue growing production without added costs.
“This transaction allows us to add acreage, production and opportunity without either the uncertainty associated with acquiring more speculative acreage or adding to our staffing and infrastructure needs,” said Sutton following the deal. “We believe that the Firewheel acquisition is exactly the kind of targeted, focused, consolidating opportunity that leverages the strengths of our team and our assets.”
REN’s management said that it expects to outspend cash flow to fund its 2017 drilling program, but that it believes they have sufficient liquidity to fund the balance.
“Assuming a 2017 average oil price of $55 per barrel and a gas price of $3.25 per MMBtu, the organic gains in Adjusted EBITDA generated from such a program could be expected to improve leverage metrics significantly, resulting in a year-end 2017 debt to Adjusted EBITDA ratio approaching 3x,” the company said in its release.
The company’s third quarter production averaged 16.1 MBOPD, up 36% from second quarter. Approximately 9.8 MBOEPD of that came from Permian assets, according to the company’s release. Resolute believes that the Permian will be producing 12 MBOEPD exiting the third quarter. The Permian now represents 61% of the company’s total production.