El Paso Corp., whose exploration and production (E&P) arm is on the market, increased its proved natural gas and oil reserves by 18% in 2011 from a year ago to 4 Tcfe.

El Paso already had plans in motion to spin off the E&P business to focus on its natural gas pipeline and midstream franchises (see Daily GPI, May 25). However, Kinder Morgan Inc.’s friendly $38 billion takeover announced two months ago changed those plans; the E&P unit now is to be sold outright (see Daily GPI, Oct. 18).

El Paso said it was disclosing its forecasts “as it engages with potential buyers” for the exploration arm.

“Our E&P business is completing a terrific year, and our results reflect the significant evolution of our asset base,” said E&P chief Brent Smolik. “We now have more than 20 years of future drilling inventory that is low-risk, oily and offers significant production and reserve growth potential. Our business has excellent momentum as we enter 2012.”

According to El Paso, the E&P business will end this year with a risked future drilling inventory of about 9.7 Tcfe, up from 8 Tcfe in 2010. Most of the increase has come from oil shale programs in the Eagle Ford and Wolfcamp. The estimates include production, reserves and resources from El Paso’s 48.8% stake in Four Star Oil & Gas Co.

“The 9.7 Tcfe risked future drilling inventory estimate includes approximately 2.0 Tcfe of proved undeveloped reserves and 7.7 Tcfe of risked unproved resources,” El Paso stated. Almost 60% of the total risked future drilling inventory is from oil and liquids, measured on a six-to-one equivalent basis.

Daily production this year is estimated at 830-840 MMcfe, which was consistent with the company’s guidance.

“At the midpoint, this represents an approximate 7% increase from 782 MMcfe/d in 2010,” the company said. “The increase is after asset sales that were expected to contribute an additional 15 MMcfe/d to full-year 2011 volumes.”

El Paso is forecasting a year-end exit rate of more than 900 MMcfe/d, which includes 23,000-24,000 b/d of oil output. E&P capital expenditures for the year are “expected to come in as planned” at around $1.6 billion.

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