Seneca Resources, the exploration and production division of National Fuel Gas Company, just reported their first quarter earnings for 2012. As part of the report, we get the following operational update which shows a 91.5 percent increase in production in Seneca’s Marcellus Shale wells.
The Exploration and Production segment operations are carried out by Seneca Resources Corporation (“Seneca”). Seneca explores for, develops and produces natural gas and oil reserves in California and Appalachia. Seneca completed the sale of its offshore Gulf of Mexico assets in April, 2011.
The Exploration and Production segment’s earnings in the first quarter of fiscal 2012 of $30.3 million, or $0.36 per share, increased $2.9 million, or $0.03 per share, when compared with the prior year’s first quarter.
Overall production of natural gas and crude oil for the current quarter of 18.2 Bcfe increased approximately 2.6 Bcfe, or 16.6 percent, compared to the prior year’s first quarter. Production from Seneca’s Appalachia properties increased approximately 61.8 percent, mainly due to a 5.4 Bcfe or 91.5 percent increase in production from Marcellus wells. Production in California increased 4.4 percent. Gulf of Mexico production decreased 2.6 Bcfe due to the April 2011 sale of Seneca’s offshore assets.
Changes in commodity prices realized after hedging also impacted earnings. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended December 31, 2011, was $4.78 per thousand cubic feet (“Mcf”), a decrease of $0.48 per Mcf compared to the prior year’s first quarter. Higher crude oil prices realized after hedging contributed to the increase in earnings. The weighted average oil price received by Seneca (after hedging) for the quarter ended December 31, 2011, was $91.38 per Bbl, an increase of $15.14 per Bbl.
Depletion, lease operating expenses (“LOE”) and general and administrative (“G&A”) expenses for the current year’s first quarter increased over last year’s first quarter due to the higher production activity discussed above. On a per unit basis, LOE decreased $0.09 per thousand cubic feet equivalent (“Mcfe”). Excluding the Gulf, on a per unit basis, LOE increased $0.02 per Mcfe largely due to higher non-operated LOE costs per unit and increased transportation, disposal and vacuum services. Depletion increased $0.12 per Mcfe due to higher capital spending in the East. G&A increased $0.04 per Mcfe due to higher labor expenses including additional staffing and relocation costs related to the opening of the Pittsburgh office in the East division.*
*National Fuel Gas Company (Feb 2, 2012) – National Fuel Reports First Quarter Earnings