QEP Resources Inc. management said it broke production records in the Permian Basin during the first quarter, but it plans to drop to a four-rig drilling program in May, even as it raises overall production guidance for the remainder of the year.
Meanwhile, CEO Chuck Stanley said the Denver-based independent had made "significant early progress" with its plans to become a pure-play operator focused on the Permian, which were first unveiled in February. But he declined to discuss the expected proceeds from the sale of its assets in the Uinta and Williston basins, as well as the Haynesville Shale and Cotton Valley formation.
"We've engaged financial advisors to assist us in the divestiture of our Williston and Uinta basin assets, and the data rooms for those two packages are now open," Stanley said during an earnings call Thursday to discuss 1Q2018. He added that the Haynesville and Cotton Valley upstream and midstream assets would be marketed in 2H2018.
"We are seeing strong interest in both the Uinta and Williston basin packages," Stanley said. "We anticipate closing the sales of these assets in the second half of the year."
Overall production totaled 11.7 million boe in 1Q2018, a 10.4% decline from the year-ago quarter (13.1 million boe). Although drilling and completion activity increased in the Permian and Haynesville/Cotton Valley, it was not enough to offset decreased drilling activity in the Williston Basin and the loss of 3.5 million boe of production from last year's exit from the Pinedale Anticline.
Broken down by play, net production in the Permian averaged a record 30,900 boe/d in 1Q2018 (2.78 million boe), which was double production from the year-ago quarter (1.39 million boe) and an 8.9% increase from the sequential quarter (2.55 million boe). QEP also saw record oil production in the Permian during 1Q2018, at 24,000 b/d.
Haynesville/Cotton Valley production more than doubled, reaching 4.29 million boe in 1Q2018, up from 2.05 million boe in the year-ago quarter. But production in the Williston Basin dropped 22.8% (from 4.83 million boe in 1Q2017 to 3.73 million boe in 1Q2018) and Uinta Basin production fell 16.9% (from 968.3 million boe in 1Q2017 to 804.5 million boe in 1Q2018).
In the Permian, QEP placed 31 gross operated horizontal wells, 13 more than originally forecast, into production in 1Q2018. Another 58 wells were in various stages of drilling or completion, or were awaiting first production at the end of the quarter. The company also placed two gross operated wells in the Haynesville/Cotton Valley, along with two gross operated vertical wells in the Uinta Basin, into production in 1Q2018.
Also during the quarter, QEP completed and returned to production seven gross operated refractured wells in the Williston's South Antelope field, plus another seven such wells in the Haynesville/Cotton Valley.
QEP had six operated rigs deployed in the Permian, and one each in the Williston and Haynesville/Cotton Valley, at the end of 1Q2018. But the company released the Williston rig on April 9, and plans to release the Haynesville/Cotton Valley rig in May. It also plans to drop to four rigs in the Permian in May, and to stay at that level for the rest of the year.
"The reduction to four rigs is really not the driving force there," Stanley said. "It's the frack crew efficiency that ultimately determines how many wells we can put on during the year.
"There's been over the past several quarters -- and really, we've hit our ultimate stride in the first quarter -- a step change in our completion efficiencies, utilizing two frack crews on to average over 325 stages per crew per month, which is, we think, the industry-leading frack efficiency."
Despite the cut in rigs, the company raised its full-year production guidance to 48.3-51.9 million boe, up from 47.7-51.5 million boe.
QEP reported a net loss of $53.6 million (minus 22 cents/share) in 1Q2018, compared with net income of $76.9 million (32 cents) in the year-ago quarter. Total revenues were $428.9 million in 1Q2018, a 2.1% increase from the $420.1 million of total revenue earned in 1Q2017.