Denver-based Jagged Peak Energy Inc., whose expertise is centered in the Permian Basin, said well delays cut into fourth quarter production results, which should be rectified this year. However, the unexpected decision by CEO Joseph N. Jaggers to step aside in March overshadowed preliminary results.
Jaggers, who has led the company since its inception in 2013, plans to retire at the end of March “for health and personal reasons.”
Independent director James M. Kleckner, a former Anadarko Petroleum Corp. executive, has been tapped to take over as president and CEO. Director Chuck Davidson, formerly CEO of Noble Energy Inc., is assuming the role of chairman.
"I am proud of the growth we have achieved at Jagged Peak and that what we accomplished was done in a spirit of continuous discovery, improvement and efficiency," said Jaggers. "From a simple beginning in 2013 with an idea and a financial commitment from Quantum Energy Partners, we built a company that today produces over 28,000 boe/d net.
“However, I will turn 65 later this year and the time has come for me to shift my focus from full-time professional duties to personal priorities. I have known Jim Kleckner for decades and have tremendous respect for his leadership qualities and character, along with the utmost confidence in his ability to lead the company to continued success."
Jaggers is expected to remain at Jagged Peak full-time until his retirement and to work on a consulting basis thereafter to assist with the transition.
The company also announced that COO J. Jay Stratton Jr. has resigned. Former Anadarko executive Craig Walters was elected to take the position. Also, Michael C. Linn, former chief of Linn Energy who currently serves as an independent director, is to be elected to Kleckner's position on the audit committee.
"On behalf of the board and the entire Jagged Peak Energy team, we thank Joe for his leadership and vision since the company's founding in 2013," said Davidson. "The company he founded is characterized by exemplary assets and an outstanding organization. He has been a leader in the industry and recognized for his foresight and tenacity” in exploring and developing the Permian’s Delaware sub-basin.
Kleckner helped lead Anadarko’s “evolution” into the Denver-Julesburg Basin, Davidson noted. “I am confident that the experience and skills he brings to the company will drive our future success as we transition to full field development.”
Kleckner was appointed as an independent member in January 2017. He retired from Anadarko in August 2016 as executive vice president of international and deepwater operations. He served in various senior level operating positions for Anadarko and its predecessors since 1981, including as regional vice president of the Rockies' operations from 2004-2013. He holds a bachelor of science (BS) degree in petroleum engineering from the Colorado School of Mines (CSM).
From 1994-2017, Walters worked at Anadarko in various operational, technical and business development roles, most recently as vice president of Rockies operations. He also has a BS in petroleum engineering from CSM.
Davidson, appointed to the board in September 2016, is a venture partner with private equity giant Quantum Energy Partners, which helped form Jagged Peak. He ran Noble from 2000-2014 and was chairman from 2011 until he retired in May 2015.
As a result of the executive management transition, Jagged Peak plans to provide 2018 guidance on March 22 when it releases its fourth quarter and full-year 2017 results.
In preliminary results for 4Q2017, the company said it produced 24,037 boe/d (80% oil), an increase of 25% sequentially. For the year, production was 16,974 boe/d, a 200% increase over 2016.
Fourth quarter production was off slightly from Wall Street consensus expectations of 25,000-26,000 boe/d.
“Fourth quarter production was less than anticipated primarily due to fewer well completions and delays with both operated and nonoperated wells coming online during the quarter,” management said. There also were issues production-wise in the third quarter, which Jagged Peak said related to delays from Hurricane Harvey, which struck the Texas coast in late August.
The company spud 14 operated wells gross during the quarter and completed and brought online 14 wells. Most of the activity was in the Delaware’s Wolfcamp A formation, where 11 wells were completed.
Lease operating expenses during the final three months of 2017 averaged $3.25/boe; full-year expenses averaged $2.88.
Capital expenditures (capex) for drilling and completion activities totaled $168.5 million in 4Q2017, with full-year expenses of $567.6 million. Capex for infrastructure totaled $8.1 million during4Q2017 and $29.9 million for the full year. Additionally, $69.1 million was spent last year to add about 9,200 net acres to the leasehold position.
At the end of 2017, Jagged Peak had total proved reserves estimated at 82.4 million boe, 80% weighted to oil, which was 118% higher year/year. Total identified locations increased to 2,090.
Jagged Peak today is operating four completion crews and five drilling rigs in the Permian. Since the start of 2018, it said it has completed and brought online four gross operated wells. Another six wells are being completed and seven more are awaiting completion.