Birmingham, AL-based Energen Corp., an independent exploration and production (E&P) company with a small natural gas-only utility in Alabama, is shifting its emphasis away from gas to oil and natural gas liquids (NGL) production next year, CEO James McManus told a financial analysts’ meeting.

In less than five years, Energen, the parent to the Alabama Gas Co. utility, has flipped its E&P mix from 54% gas and 46% oil/NGLs production to 54% liquids and 46% gas as of the end of this year, McManus said.

A little more than five years ago, Energen was hedging natural gas at $9/Mcf and oil at less than $70/bbl (see Daily GPI, May 7, 2007), and now McManus with $4 gas and $100 oil said the price of gas doesn’t make any difference because of the value of the NGLs.

Since 2010, Energen will have nearly doubled its liquids production from 1.9 million boe to 3.5 million boe in production estimated for 2013. Five years ago, gas represented nearly two-thirds of Energen’s holdings.

McManus said the company has invested $2.3 billion between 2009 and the end of last year in capital expenditures, and most recently that has been focused on oil plays in the Permian and Delaware basins, with a de-emphasis of its heavy natural gas-dominated assets in the San Juan Basin in New Mexico.

Production growth since 2010 has been 28% and 23% for oil and NGLs, respectively, McManus said. During the same period the growth in natural gas was 1%.

While there are not a lot of opportunities for buying large chunks of the Permian and other basins (50,000-100,000 acres), McManus, in response to a question, said Energen is already well positioned with its holdings in the Permian, and it can get small plays in the 5,000- to 10,000-acre range if it wants.

McManus said Energen intends to step up its activity in the Midland-Wolfcamp shale plays in the Permian Basin, where he said the company holds 64,000 net acres of horizontal plays at 785 potential drilling locations. Energen will have more than a dozen rigs operating across the region next year, he said

“We’re one of the most active drillers in the Permian,” said McManus, adding that E&P will continue to provide about 85% of the company’s profits with the central Alabama-based gas utility providing about 15%. Even with the pullback of activity in the San Juan, Energen remains the fourth biggest producer there, he said. “We’re in really good position in the basin,” he said.

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