Prima (NASDAQ:PENG)
Historical Stock Chart
From May 2019 to May 2024
Prima Energy Corporation Reports On Reserves, Operations, Hedging and 2004 Plans
DENVER, March 8 /PRNewswire-FirstCall/ -- Prima Energy Corporation today
reported its estimated 2003 year-end oil and gas reserves, and provided updates
on its recent operations, hedging activities, estimated 2004 production and
capital investment plans for the current year.
Oil and Gas Reserves
The Company reported that its estimated net proved reserves at December 31, 2003
totaled 96.0 billion cubic feet (Bcf) ofnatural gas and 5.0 million barrels of
oil, or 125.8 Bcf of natural gas equivalents (Bcfe). Approximately 70% of these
proved reserves were classified as developed. The present value of estimated
future net revenues from proved reserves, before income taxes, using a 10%
discount factor (PV10), totaled approximately $240 million at year-end 2003.
These estimates were prepared in accordance with Securities and Exchange
Commission guidelines that prescribe using product prices in effect as of the
last day of the year, without future escalation. Key benchmark spot market
prices as of December 31, 2003 were $5.57 per MMBtu of natural gas delivered
into the Colorado Interstate Gas ("CIG") pipeline system and $32.52 per barrel
of light, sweet crude oil delivered at Cushing, Oklahoma. Incorporating all
appropriate adjustments for product quality, location and costs of
transportation, average prices reflected in Prima's proved reserve estimates at
the end of 2003 were $4.95 per Mcf of natural gas and $32.88 per barrel of oil.
At the end of the prior year, Prima's estimated proved reserves totaled 87.4 Bcf
of natural gas and 3.9 million barrels of oil, or 111.1 Bcfe, with a PV10 of
approximately $129 million, using average adjusted product prices of $2.64 per
Mcf of natural gas and $31.30 per barrel of oil.
The 13% year-over-year increase in proved reserves was due to additions of 15.5
Bcfe from extensions, discoveries and acquisitions, and 19.4 Bcfe of net
positive revisions, partially offset by 15.4 Bcfe of net production and 4.8 Bcfe
of reserves sold or swapped for other assets. The extensions, discoveries and
acquisitions were primarily attributable to activities in the D-J Basin and
revisions were largely due to the effect of higher gas prices.
Proved reserves are defined by the Securities & Exchange Commission as estimated
quantities that geological and engineering data demonstrate with reasonable
certainty to be recoverable in the future from known reservoirs under the
assumed economicconditions. Prima also estimates probable reserves for its D-J
Basin and Powder River Basin coal bed methane ("CBM") properties. As defined by
the Society of Petroleum Engineers, probable reserves are less certain than
proved and are considered to be those that can be estimated with a degree of
certainty sufficient to indicate that they are more likely to be recovered than
not.
Using year-end prices held constant, Prima's estimated probable reserves totaled
approximately 332 Bcfe at the end of 2003,compared to 323 Bcfe at the end of
2002. At both dates, estimated probable reserves were primarily associated with
the Company's Powder River Basin CBM properties.
Prima's estimated proved and probable reserves were audited by Netherland Sewell
& Associates, Inc., independent petroleum engineering consultants.
In addition to the SEC Constant Price Case, we also prepared reserve estimates
based on prices quoted on futures markets on December 31, 2003 for each of the
next five years, after which prices were held constant. After incorporating all
adjustments to quoted benchmark index prices that are applicable to our property
base, average price realizations reflected in this alternate case for proved
reserves were $3.67 per Mcf of natural gas and $27.64 per barrel of crude oil.
For probable reserves, the average gas price of $2.83 per Mcf reflected a
significantly greater weighting of Powder River Basin CBM production, for which
we receive lower wellhead prices. The following table summarizes estimated
proved and probable reserve volumes and PV10 values calculated as of December
31, 2003 for both the year-end Constant Price Case and this Alternate Price
Case.
Constant Price Case Alternate Price Case
Volumes PV10 Volumes PV10
(Bcfe) (Millions) (Bcfe) (Millions)
Proved Reserves 125.8 $239.8 115.6 $163.9
Probable Reserves 332.5 $477.6 320.9 $260.6
Proved + Probable
Reserves 458.3 $717.4 436.5 $424.5
2003 Investment Activities and 2004 Capital Budget
Prima's investments on oil and gas properties in 2003 aggregated approximately
$26.9 million ($25.1 million, net of $1.8 million of proceeds from asset sales).
The gross amount included approximately $12.4 million for exploitation and
development of properties in the D-J Basin, $8.5 million of costs incurred on
Powder River Basin CBM properties, $3.1 million for exploration and development
of other properties, $0.8 million for acreage costs, and $2.1 million of
capitalized overhead. A significant portion of these investments was related to
development of proved properties in the D-J Basin and in the Porcupine-Tuit CBM
area, or was incurred on projects still under evaluation for proved reserves,
such as deeper coal seams in the Powder River Basin and active exploratory
prospects.
Drilling activities in 2003 were conducted on 123 (86.2 net) wells. These
included 28 (27.0 net) wells in the D-J Basin, 76 (57.7 net) CBM wells in the
Powder River Basin, 17 (1.3 net) wells in the Cave Gulch area in the Wind River
Basin, and two (0.2 net) exploratory wells in the Green River and Washakie
Basins, respectively. Production has been established from all of the D-J Basin
wells, 24 (23.0 net) of the CBM wells, and 15 (1.2 net) Cave Gulch wells. The
remaining wells are all waiting on hook-up or are still being completed. During
2003, Prima also participated in refracturing or recompleting 42 (41.0 net) D-J
Basin wells, all of which were successfully restored to production with improved
rates.
Excluding acquisitions, Prima's preliminary plans for 2004 provide for capital
investments of approximately $45 million. Our current projected allocation for
these capital investments is approximately as follows: $14 million for
development of properties in the D-J Basin; $24 million for exploitation of CBM
properties in the Powder River Basin; and $7 million for other costs, including
higher-risk exploration activities, acreage acquisitions, oilfield services
equipment, and capitalized overhead. This budget is preliminary and may be
adjusted upward or downward in response to new developments during the year.
Expected 2004 activities include: drilling approximately 35 wells and re-
fracturing or re-completing approximately 50 wells in the D-J Basin; drilling an
estimated 150 CBM wells in the Powder River Basin and hooking up most of these
and 130 previously-drilled CBM wells; participation in up to six wells in the
Cave Gulch area; and continued exploratory operations on Prima's Coyote Flats
Prospect in Utah and the Merna Prospect in the Green River Basin. A test well
may alsobe initiated this year on the Christmas Meadows prospect in the Table
Top Unit, along the Overthrust Belt in northeastern Utah. These activities are
dependent on securing drilling permits and other required regulatory approvals,
among other factors.
The CBM activities planned for 2004 include additional drilling to further
develop the Porcupine-Tuit field, which currently produces from a relatively
shallow Wyodak coal, and operations to evaluate and develop deeper unproved
coals within our Kingsbury, Cedar Draw, North Shell Draw and Wild Turkey project
areas. We anticipate that these deeper coals will need to be de- watered for a
period of time, perhaps a year or more, before significant gas production rates
are established. As a result, these activities may not generate significant
additions to proved reserves in the current year, but if our expectations are
met they would be expected to result in the conversion of a substantial portion
of our probable reserves to proved reserves and increasedproduction over the
following two to three years.
We intend to fund these planned capital investments with cash flow from
operations and available working capital. Although not budgeted, we continue to
seek acquisitions that we believe will enhance our existing businesses. At the
end of 2003, Prima held cash and short-term investments totaling approximately
$57 million and had no long-term debt. An acquisition could be consummated using
these cash reserves, bank borrowings, and/or through issuance of debt or equity
securities.
Production
Without contributions from new exploration or acquisitions, we are projecting
that our current year oil and gas production will total between 15.6 Bcfe and
16.1 Bcfe, which compares to 15.4 Bcfe in 2003. Approximately 40% of current
year production is projected to come from Powder River Basin CBM properties.
Most of this is expected to be derived from currently producing Porcupine-Tuit
wells that will exhibit depletion-related declines during the year.
Contributions from new wells in the Powder River Basin are expected to begin
during the third quarter and increase as de-watering occurs. Overall, excluding
acquisitions or discoveries, Prima's net production is projected to decline
during 2004 until late inthe year when production from new CBM wells is
expected to ramp up.
Commodity Derivatives / Hedges
Prima's open derivatives contracts cover an aggregate 5,250,000 MMBtu of natural
gas and 95,000 barrels of crude oil, as summarized below:
Time Period Market Total Volumes Contract
Index (MMBtu or Bbls) Price
Natural Gas
April - October 2004 NW Rockies 4,900,000 $4.41
November 2004 CIG 350,000 4.00
Crude Oil
April - September 2004 NYMEX 95,000 31.27
As of the market close on February 27, 2004 these open positions had an
aggregate unrealized mark-to-market net loss of $2,474,000. Year-to-date, the
Company has realized net losses totaling $442,000 on commodity derivative
positions that have been closed out.
For the first three months of 2004, the CIG monthly index has averaged $4.87 per
MMBtu, compared to $3.78 inthe same period of 2003. As of the market close on
February 27, 2004, the quoted futures prices for the CIG index for the months of
April through December 2004 averaged $4.72 per MMBtu, compared to $4.12 per
MMBtu for the same months in 2003.
Prima isa Denver-based independent oil and gas company engaged in the
exploration for, acquisition, development and production of natural gas and
crude oil. Through its wholly owned subsidiaries, Prima is also engaged in oil
and gas property operations, oilfield services and natural gas gathering,
marketing and trading. The Company's current activities are principally
conducted in the Rocky Mountain region of the United States.
Cautionary Note to U.S. Investors -- The United States Securities and Exchange
Commission permits oil and gas companies, in their filings with the SEC, to
disclose only proved reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and legally
producible under existing economicand operating conditions. We use certain
terms in this press release, such as probable reserves, that the SEC's
guidelines strictly prohibit us from including in filings with the SEC. U.S.
Investors are urged to consider closely the disclosures in our Form 10-K, File
No. 0-9408, available from us at 1099 18th Street, Suite 400, Denver, CO 80202
or through our website at http://www.primaenergy.com/. You can also obtain this
form from the SEC by calling 1-800-SEC-0330 or via the website
http://www.sec.gov/.
This press release contains "forward-looking statements" which are made pursuant
to the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. These statements include, without limitation, statements relating to
oil andgas reserve estimates, future drilling and development plans, future
capital investments, liquidity, financing of operations, future oil and natural
gas prices, future oil and gas production, future cash flow, future additions to
proved reserves, and other such matters. The words "expected," "anticipate,"
"projected," "intend" or "planned," and similar expressions identify
forward-looking statements. Such statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Prima does not
undertake to update, revise or correct any of the forward-looking information.
Factors that could cause actual results to differ materially from the Company's
expectations expressed in the forward- looking statements include, but are not
limited to, the following: industry conditions; volatility of oil and natural
gas prices; hedging activities; operating hazards and uninsured risks; potential
liabilities, delays and associated costs imposed by government regulation
(including environmental regulation); uncertainties about oil and natural gas
reserve estimates; the need to develop and replace oil and natural gas
reserves; the substantial capital expenditures required to fund operations;
risks related to exploration and developmental drilling; competition and the
conduct of third parties. For a more complete explanation of these various
factors, see "Cautionary Statement for the Purposes of the 'Safe Harbor'
Provisions of the Private Securities Litigation Reform Act of 1995" included in
the Company's latest Annual Report on Form 10-K filed with the Securities And
Exchange Commission.
DATASOURCE: Prima Energy Corporation
CONTACT: Richard H. Lewis, President and Chief Executive Officer, or
Neil L. Stenbuck, Executive Vice President and Chief Financial Officer, both
of Prima Energy Corporation, +1-303-297-2100
Web site: http://www.primaenergy.com/