Citing "greatly improved" permit processing by the U.S. Bureau of Land Management, Western Gas Resources expects to grow its unconventional gas production by between 10-15% this year and 15-20% in 2006, company officials said in an earnings conference call last Thursday. While production, mainly from the Rockies area, was only up 5% in 2004 over 2003, net income increased 42% to a record $119.2 million.
Anticipating Western will have about 500 drilling permits in hand by early April, "we're in a lot better shape now than we were last year," CEO Peter Dea said. He commended BLM for improving its processing, saying the results started to show up in late 2004. In addition to the drilling permits, Western also is making progress in acquiring water discharge permits and has a number of wells going through the dewatering process.
While most of its production is from the Powder River and Green River Basins of the Rockies, where it controls 1.6 million net acres, Western in January opened an office in Canada to look for opportunities for coalbed methane production there.
Western's net production in 2004 was 55.5 Bcfe and averaged 152 MMcfe/d. Gas throughput volumes at the company's gathering and processing facilities averaged 1.36 Bcf/d in 2004, a slight increase compared to 2003.
Total gas sales volumes marketed, including equity gas production, gas produced at Western's plants and gas purchased from third parties for resale, averaged 1.2 Bcf/d in 2004. Average gas prices increased 13% to $5.59/Mcf in 2004 compared to $4.94/Mcf for 2003.
Total natural gas liquids (NGL) sales volumes marketed averaged 1.6 million gallons per day in 2004, while average NGL prices received increased 29% to $0.75 per gallon in 2004 compared to $0.58 per gallon in 2003.
In 2005 natural gas production from the Powder River Basin CBM development is expected to average 109-112 MMcf/d net, with an additional 45-48 MMcf/d produced from the Greater Green River Basin. Natural gas production from other areas, including the San Juan Basin, is expected to average 13 to 15 MMcfe/d net in 2005.
While Western has no Canadian acreage, it is looking to leverage its Rockies CBM experience and capital into possible joint venture activities in the growing business of developing unconventional resources in Canada. Also, its gathering and processing expertise could be a plus. "We just love to do gathering, compression and processing," a Western executive told analysts in the conference call, noting that other companies are not as enthusiastic on the service side.
Western's net income of $119.2 million or $1.61 per share of common stock in 2004, compared to net income in 2003 of $84.2 million, or $1.13 per share.
For the fourth quarter of 2004, net income increased 115% to $41.0 million, or earnings of $0.55 per share of common stock, compared to net income of $19.1 million, or earnings of $0.25 per share, for the same period in 2003.
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