WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)--Jul. 25, 2012--
Seneca Resources Corporation (“Seneca”), the wholly owned exploration
and production subsidiary of National Fuel Gas Company (NYSE: NFG)
(“National Fuel” or the “Company”) today provided an update on the
status of its Marcellus Shale joint venture with EOG Resources, Inc.
(“EOG”), as well as anticipated changes to capital expenditures and
production forecasts for its 2013 fiscal year.
Under a joint venture agreement (“JV”) between EOG and Seneca, EOG has
the opportunity to earn an interest in Seneca acreage by drilling a
minimum number of wells per year in a defined area of mutual interest.
EOG has advised Seneca that it does not expect to meet the minimum
drilling target for calendar 2012 specified in the JV. Should it not
meet that minimum, EOG would no longer have the right to earn additional
acreage from Seneca. However, both parties would retain their respective
working interests in wells previously drilled and the parties could
drill additional JV wells on the acreage that has been earned. As of
July 21, 2012, EOG has earned a 50 percent working interest in
approximately 34,000 gross acres contributed by Seneca to the joint
venture.
“The joint venture with EOG has been successful in achieving the goals
we identified when the agreement was signed in 2006,” said David F.
Smith, Chairman and Chief Executive Officer of National Fuel. “With a
minimal initial investment, we evaluated our acreage and learned from an
experienced shale gas operator, simultaneously developing a talented
Marcellus Shale operations team that has grown our Marcellus production
substantially from the program’s inception. While we expect a modest
impact to our near-term growth outlook, having full control of our
largely royalty-free, contiguous acreage position unencumbered by a JV
further enhances the long-term value of our Appalachian assets.”
As a result of this indicated reduction in JV activity, Seneca
anticipates very little drilling or completion activity on JV acreage in
fiscal 2013. This will lead to an inventory of previously drilled wells
that likely will remain uncompleted until natural gas prices reach an
acceptable level. Even though Seneca had already discussed its plans to
limit participation in future JV wells to its 20 percent overriding
royalty interest, the change in EOG’s JV activity will further reduce
Seneca’s previously announced capital expenditure and production
guidance for its 2013 fiscal year. Capital spending is expected to
decrease by approximately $50 million, largely as a result of EOG’s
anticipated postponement of completion activity, to a range of $400 to
$500 million. Consequently, production is now expected to be in the
range of 92 to 105 billion cubic feet equivalent (“Bcfe”), reduced from
the previous guidance of 100 to 115 Bcfe.
In Seneca’s wholly-owned Marcellus development program, production has
been initiated on the first three wells of a six-well pad located on its
DCNR 595 tract in Tioga County, Pa. These three wells had peak 24-hour
production rates that averaged 7.9 MMcf per day of natural gas, with the
best well achieving a rate of 9.3 MMcf per day.
As of July 23, 2012, Seneca’s total net Marcellus production is 200
million cubic feet (“MMcf”) per day of natural gas, of which
approximately 44 MMcf per day comes from 65 gross horizontal wells
within the JV.
National Fuel is an integrated energy company with $5.8 billion in
assets comprised of the following four operating segments: Exploration
and Production, Pipeline and Storage, Utility, and Energy Marketing.
Additional information about National Fuel is available at www.nationalfuelgas.com
or through its investor information service at 1-800-334-2188.
Certain statements contained herein, including statements that are
identified by the use of the words “anticipates,” “estimates,”
“expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,”
“believes,” “seeks,” “will,” “may” and similar expressions, are
“forward-looking statements” as defined by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve risks
and uncertainties, which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking
statements. The Company’s expectations, beliefs and projections
contained herein are expressed in good faith and are believed to have a
reasonable basis, but there can be no assurance that such expectations,
beliefs or projections will result or be achieved or accomplished. In
addition to other factors, the following are important factors that
could cause actual results to differ materially from those discussed in
the forward-looking statements: factors affecting the Company’s ability
to successfully identify, drill for and produce economically viable
natural gas and oil reserves, including among others geology, lease
availability, title disputes, weather conditions, shortages, delays or
unavailability of equipment and services required in drilling
operations, insufficient gathering, processing and transportation
capacity, the need to obtain governmental approvals and permits, and
compliance with environmental laws and regulations; changes in laws,
regulations or judicial interpretations to which the Company is subject,
including those involving derivatives, taxes, safety, employment,
climate change, other environmental matters, real property, and
exploration and production activities such as hydraulic fracturing;
changes in the price of natural gas or oil; uncertainty of oil and gas
reserve estimates; significant differences between the Company’s
projected and actual production levels for natural gas or oil;
governmental/regulatory actions, initiatives and proceedings; delays or
changes in costs or plans with respect to Company projects or related
projects of other companies, including difficulties or delays in
obtaining necessary governmental approvals, permits or orders or in
obtaining the cooperation of interconnecting facility operators;
financial and economic conditions, including the availability of credit,
and occurrences affecting the Company’s ability to obtain financing on
acceptable terms for working capital, capital expenditures and other
investments, including any downgrades in the Company’s credit ratings
and changes in interest rates and other capital market conditions;
changes in economic conditions, including global, national or regional
recessions, and their effect on the demand for, and customers’ ability
to pay for, the Company’s products and services; the creditworthiness or
performance of the Company’s key suppliers, customers and
counterparties; economic disruptions or uninsured losses resulting from
major accidents, fires, severe weather, natural disasters, terrorist
activities, acts of war or cyber attacks; changes in price differential
between similar quantities of natural gas at different geographic
locations, and the effect of such changes on the demand for pipeline
transportation capacity to or from such locations; other changes in
price differentials between similar quantities of oil or natural gas
having different quality, heating value, geographic location or delivery
date; or significant differences between the Company’s projected and
actual capital expenditures and operating expenses. The Company
disclaims any obligation to update any forward-looking statements to
reflect events or circumstances after the date thereof.
Source: National Fuel Gas Company
National Fuel Gas Company
Analysts:
Timothy
J. Silverstein, 716-857-6987
Media:
Karen L.
Merkel, 716-857-7654