Energen Corp. management said the first quarter of 2013 was “both encouraging and challenging” as test wells in the Third Bone Spring and Wolfberry formations of the Permian Basin performed well, but cold weather and interference issues worked against the company as profits fell slightly.

“The first three months of 2013 were both encouraging and challenging,” CEO James McManus told financial analysts during an earnings call. He said initial results from nine wells tested in the Third Bone Spring during the quarter “were excellent,” with an average initial stabilized rate of 1,230 boe/d, 74% weighted toward oil.

Five of the test wells had a 30-day production average of 625 boe/d, with 71% oil. He said two Third Bone Spring wells had an initial stabilized rate of near 2,000 boe/d, and added that 42 gross wells in Wolfberry tested at an average initial stabilized rate of 123 boe/d, and a 30-day production average of 109 boe/d, both weighted 75% oil.

In the Wolfcamp formation, where unit Energen Resources Corp. held 343 million boe of proved reserves in 2011, McManus said the company was “very excited” about assessing the potential of the Delaware and Midland basins that are within the Permian. The CEO said four wells in the Delaware Basin begun in 2012 are now in various stages of completion or testing, while the first well from the 2013 program is awaiting completion.

Energen plans to drill 10 gross (eight net) wells in the Delaware Basin in 2013. Meanwhile, in the Midland Basin, McManus said Energen planned to start drilling a test well in Glasscock County, TX. The well, which the company has a 21% nonoperated interest in, would target the Upper Wolfcamp formation. Energen plans to drill six net wells in the Midland Basin this year.

Energen reported 1Q2013 production of 5.92 million boe, a 3% increase over the 5.76 million boe produced in the year-ago quarter. Oil production grew 19% from 1.95 million boe to 2.31 million boe, as did natural gas liquids production, up 6% from 620,000 boe to 656,000 boe. But natural gas production fell 7%, from 3.18 million boe to 2.95 million boe. McManus said the company would ramp up production in order to reach its goal of 26.1-26.5 million boe by the end of the year.

Energen had net income of $56.7 million (78 cents/share) in 1Q2013, down 1.2% from the $57.4 million (79 cents) in the year-ago quarter.

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