NFR Energy LLC announces 78% proved developed reserve growth, 57% year over year production increase and provides 2012 guidance

Tuesday, Mar 06, 2012

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.

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.

SOURCE NFR Energy LLC

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