Below are notes from PQ's presentation in Denver on October 14 to EnerCom:
PQ has demonstrated the ability to grow during a tough price environment for gas
PQ is focused on basins that can add the most value based upon location and geology, and has exited positions where creating the required scale was cost prohibitive
East Texas Cotton Valley – horizontal liquids-rich gas play; sandstone has 10 times more porosity, is easier to frac (using white sand) and displays lower decline rates than the Eagle Ford shale (40% compared to 50%); current acreage position provides plenty of runway to grow and options exist to expand into adjacent acreage; located close to key infrastructure for gas takeaway; good pricing (premium to Henry Hub); most recent wells have displayed strong IP and original reserve booking; rich NGL mixture (30% liquids, mostly C4 / C5); CV formation is approximately 800 feet thick, and while not all of the zone will be productive, PQ believes the siltstones above and below the tight sandstone are contributing to the production profile; PQ continues to de-risk its 55,000 net acreage position; average IP rates for PQ’s Cotton Valley horizontal wells are up 34% in 2014 versus 2013, and up 94% from 2011
Mid-Con Woodford Shale – strong JV partner (NextEra Energy Resources) with high demand for natural gas and desire to source additional supply; adding a second rig and increasing well count in 2H14; Bravo Natural Resources LLC recently paid $250 million to Canaan Natural Gas PE Funds (a private company headquartered in Oklahoma City) for 56,000 net acres ($4,464/acre) in and around PQ’s Woodford Shale acreage; this implies a value of $151.8 million for PQ’s Woodford acreage
Gulf Coast – PQ’s historical drilling success rate is 73%; PQ-operated onshore Fleetwood JV (with MidStates Petroleum) starts drilling in second half of 2014; high oil-focused horizontal play, with rock characteristics similar to East Texas; the Gulf Coast assets generate net-cash for investment in other core assets; PQ estimates the Thunder Bayou prospect could contain 162 Bcfe of unrisked reserves (the Thunder Bayou prospect is testing the Cris R horizon where PQ made a significant discovery in 2011 at La Cantera – since that discovery, PQ has successfully drilled and completed three wells on its La Cantera complex); more than $400 million of free cash flow has been generated from the Gulf Coast assets since 2007 (1H’14 FCF is almost in line with 2013 year’s full year number)
PQ has demonstrated the ability to grow during a tough price environment for gas