Resolute Energy Corp. said its first horizontal wells targeting the Delaware Basin and part of the Powder River Basin have exceeded its expectations, and the company plans to devote most of its 2014 budget to capital expenditures (capex) in the two plays.

The Denver-based company said its first horizontal well targeting the Delaware Basin -- LH Meeker C21 1501H, in Reeves County, TX -- had a 24-hour peak production rate of 1,403 boe/d and an initial 30-day production rate averaging 1,074 boe/d. A second well in the play, James 02 1401H, is awaiting completion while a third, Harrison State C20 1401H, is nearing total depth.

"Our current focus is on the Wolfcamp A and B intervals, and we are monitoring activity in the area targeting additional zones in the Wolfcamp and Bone Spring horizons," the company said Monday. "The majority of our 28,200 gross (12,800 net) acres in Reeves County are concentrated, which will allow us to operate most of the wells that we plan to drill."

Meanwhile, Resolute also completed its first horizontal well targeting the Turner/Frontier formation in the Hilight Field of the Powder River Basin. The well, Castle 3-21TH, achieved an average 90-day production rate of 723 boe/d, an amount 44 boe/d higher than its 30-day average production rate, with 81% weighted toward oil.

"Clearly, these wells are very attractive investment opportunities, so they will be strong competitors for capital," CEO Nick Sutton said during a conference call Monday to discuss 4Q2013 and full-year 2013 earnings. "With up to 48 potential horizontal Turner/Frontier drilling locations currently identified, the Powder River Basin offers complementary visible growth potential to our core Permian assets.

"The great news is that all of our 47,400 net acres in Hilight Field are held by production. The well economics are not burdened by acreage acquisition costs. We operate 100% of our leasehold and, like the Permian, the geology at Hilight offers multiple pay zones and opportunities for additional oil development."

Sutton said the company's focus on horizontal drilling for oil targets in the Permian Basin would drive its oil production totals higher, and said Turner/Frontier wells would provide more growth opportunities. Production averaged 12,709 boe/d in 4Q2013, a 26.2% increase over 4Q2012 (10,073 boe/d). For the full year 2013, production averaged 12,239 boe/d, up 31.4% from 2012 (9,313 boe/d).

Resolute said it plans to spend between $136 million and $153 million on capex in 2014, on base development activities that include drilling, completions and facilities construction and upgrades. That range includes $70-77 million in the Permian Basin, $18-20 million in the Aneth oil field, located in the Four Corners region, and $12-14 million in the Powder River Basin.

The company also released 2014 production guidance of between 4.5 million and 4.9 million boe (12,400-13,400 boe/d), with 82% weighted toward oil and natural gas liquids (NGL). Lease operating expenses were expected to range between $98 million and $113 million in 2014, slightly below 2013 figures.

Year-end estimated proved reserves fell 24.6% between 2012 and 2013, from 78.7 million boe at to 59.4 million boe, respectively. Resolute attributed most of the decline to the U.S. Securities and Exchange Commission's (SEC) "five year rule," which dropped proved undeveloped (PUD) reserves by about 25 million boe, but it was offset by about 6 million boe from purchases, production and other revisions.

"It just simply makes sense to allocate more capital to the horizontal drilling program," Sutton said. "But since our activities in the Permian/Powder River Basin are just getting started, the reserve additions in horizontal Wolfcamp and the Turner/Frontier formations did not grow fast enough in 2013 to offset the reduction in fifth-year PUDs at Aneth."

During 4Q2013, Resolute recorded a net loss of $117.1 million (minus $1.60/share) on revenue of $92.7 million. By comparison, the company recorded a net loss of $1.6 million (minus 3 cents/share) on $66.9 million during the preceding fourth quarter.

Resolute recorded a net loss of $113.8 million (minus $1.67/share) on revenue of $349.8 million for the full year 2013. This compares to net income of $18.0 million (30 cents/share) on revenue of $258.3 million for all of 2012.