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MRD Now Pure-Play E&P Focused on Louisiana's Terryville

Two weeks after divesting all of its East Texas and non-core Louisiana assets to its master limited partnership (MLP), executives with Memorial Resource Development Corp. (MRD) said their company is now a pure-play exploration and production (E&P) outfit focused on redeveloping a legacy oil and gas field in Louisiana.

On Feb. 23, Memorial Production Partners LP (MEMP) and its general partner, MRD, closed a deal where MRD exchanged its aforementioned assets for all of MEMP's non-operated interests in the Terryville Field -- located in Lincoln Parish, LA -- for $78 million in cash. MEMP is a publicly traded upstream MLP with operations in the Permian Basin, the Rockies, East Texas/North Louisiana and the Eagle Ford Shale in South Texas (see Shale DailyMay 5, 2014).

"MRD is now a pure-play Terryville E&P company, which allows us to slowly focus on improving our operations, enhancing our efficiencies and optimizing our returns in Terryville Field," MRD President Bill Scarff said Wednesday during a conference call to discuss the company's performance during 4Q2014 and full-year 2014.

Houston-based MRD still holds some assets in the Rockies region of Colorado and Wyoming, specifically in the Tepee Field of the Piceance Basin targeting the Mancos and Williams Fork formations. The company held 162,375 gross (66,191 net) acres in the region at the end of 2013.

MRD said it plans to spend about $500 million on capital expenditures (capex) for drilling and completions in 2015, and to complete 40-45 gross wells in the Terryville Field. Of those wells, the company plans to bring eight to 10 gross horizontal wells online during the first half of the year, completing the remaining portion during the second half.

By comparison, MRD spent $517.5 million on capex in 2014, including $97.8 million on acquisitions, about 90% of which was for five acquisitions in and around the Terryville Field. The company said that since its initial public offering on Nasdaq last June (see Shale DailyJune 13, 2014) it has increased its position in the Terryville by about 33%, to approximately 79,571 gross (65,314 net) acres as of March 1.

MRD was running six rigs in the Terryville and one in East Texas at the end of 2014. Since then, it has dropped the East Texas rig and added two more in the Terryville.

"While most of our competitors are ratcheting back 2015 capex and decreasing production...our strong hedge positions and asset base supports our robust production growth projections," said CFO Drew Cozby. "Due to our large percentage of future production hedged, investors can be assured the volatility and commodity prices are expected to have a limited impact on our operations and future capital decisions. Furthermore, our capital spending activity should benefit not only 2015, but future production as well."

Scarff added that MRD "will continue to look for attractive bolt-on acreage in and around the Terryville Field. We have ability the local knowledge and the resources to add to MRD's always significant position."

Average daily production increased 103.6% during the fourth quarter, from 138.5 MMcfe/d in 4Q2013 to 282 MMcfe/d in 4Q2014. Net production for 4Q2014 totaled 25.9 Bcfe, which included 262,000 bbl of crude oil, 608,000 bbl of natural gas liquids (NGL) and 20.7 Bcf of natural gas. By comparison, net production during 4Q2013 totaled 12.7 Bcfe and included 167,000 bbl of oil, 467,000 bbl of NGL and 8.9 Bcf of gas.

MRD said that during 4Q2014, about 91% of its average daily production was associated with the Terryville Field, with the remainder attributable to the East Texas and Rockies regions. The company said it brought 12 horizontal gross wells online during 4Q2014 -- 11 in the Terryville Field and one in East Texas, the latter of which was divested in February.

Full-year average daily production increased 76.9%, from 128.3 MMcfe/d in 2013 to 226.9 MMcfe/d in 2014. Net production for 2014 totaled 82.8 Bcfe, which included 951,000 bbl of oil, 2.2 million bbl of NGL and 63.8 Bcf of gas. By comparison, net production in 2013 totaled 48.8 Bcfe and included 665,000 bbl of oil, 1.46 million bbl of NGL and 34.1 Bcf of gas.

According to MRD, average daily production in the Terryville Field increased 89% between 2013 and 2014, from 103 MMcfe/d to 195 MMcfe/d, respectively. During 2014, the company said it brought 42 gross wells online -- 34 in the Terryville Field, six in East Texas and two in the Rockies. Of the 34 Terryville wells, 31 horizontal wells were completed in four primary, over-pressured zones in the Lower Cotton Valley, with an average 30-day initial production rate of 20.2 MMcfe/d; the others were one horizontal well targeting an Upper Cotton Valley zone and two vertical wells.

MRD reported adjusted net income of $1.8 million for 4Q2014, compared to a loss of $1.4 million in 4Q2013. The company said adjusted net income for 4Q2014 was impacted by impairment and exploration costs in the Rockies. For the full-year 2014, MRD reported adjusted net income of $83.1 million, compared to $50.1 million for 2013.

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