Memorial Resource Development Corp. Announces Fourth Quarter and Full Year 2015 Results  February 23, 2016

Excerpt

Operational Update

MRD reported fourth quarter 2015 average daily production of 426 MMcfe/d, which represents a 64% increase compared to the fourth quarter 2014.  MRD turned 6 gross wells to sales during the fourth quarter 2015, including the two-well Temple pad targeting the Upper Red zone. The Temple pad is significant as it represents two of the southernmost wells drilled to date in the Terryville Field. This two-well pad had an average lateral length of 7,009 feet and delivered a combined 30-day IP rate of 50.5 MMcfe/d. 

MRD brought to sales 10 gross horizontal wells year-to-date and expects an additional 3 wells to come online by the end of February 2016.  In total, these wells will consist of 9 Upper Red wells and 4 Lower Red wells. 

MRD continues to decrease its average D&C costs through improved operational efficiencies and further cost reduction measures.  MRD estimates its first thirteen wells of 2016 will have an average D&C cost of approximately $10.7 million per well and average lateral length of 7,622 feet.  This equates to $1,404 per foot of completed lateral length, which represents an 11% reduction from MRD's full-year 2015 guidance of $11.8 million per well for a 7,500 foot lateral.  The three well pad that is scheduled to come online by the end of February is expected to average $9.0 million per well with an average lateral length of 7,820 feet, which equates to $1,151 per foot of completed lateral length. 

2016 Development Plan

As previously announced, MRD expects to spend approximately $350 million (using the mid-point of MRD's previously announced guidance) on its 2016 D&C capital budget and to complete between 30 and 35 gross wells in the Terryville Field in 2016 with an average lateral length of approximately 7,200 feet.  MRD expects to bring online approximately 15 gross horizontal wells during the first quarter of 2016 with the remaining portion of its wells to be completed between August and September of 2016.  As a result of the development within the Terryville Field, shut-in production associated with offset completions can be impactful for the scheduled periods of time, and MRD has allowed for these development timing issues in its previously issued production guidance.  During 2016, MRD plans to operate an average of 4 drilling rigs in North Louisiana, which compares to 9 operated rigs during 2015. 

MRD expects to have an inventory of approximately 30 drilled but uncompleted wells ("DUCs") at the end of the second quarter and between 20 and 25 DUCs at the end of 2016.  MRD estimates that approximately $115 million will be used to drill these 20 to 25 DUCs, which will contribute to 2017's production growth.  Importantly, the completion of these DUCs can be accelerated should commodity prices warrant.

As a result of the significant inventory of DUCs, MRD believes it has the ability to increase its 2016 production growth guidance range significantly by completing these additional wells with a minimal amount of associated capex.  For example, if MRD elected not to defer the aforementioned completions, MRD estimates it could grow 2016 annual production by approximately 35% to 40% by spending an additional $115 million to $125 million during the second half of 2016.

MRD chose to defer completions on some wells in 2016 as it allows MRD to retain a strong balance sheet and preserve liquidity during the current commodity cycle downturn, all while remaining cash flow neutral.  MRD believes this strategy, coupled with a strong balance sheet, best positions itself to quickly respond to higher commodities prices when appropriate, providing greater returns to its shareholders.

Although MRD has not included drilling and completion cost savings in its 2016 guidance, MRD anticipates pad drilling and completion operations and other service market cost reductions during the year, which could provide further potential upside to its full year projections.  MRD will continue to aggressively pursue cost-cutting initiatives in all facets of its program, including both capital and expense related items.

North Louisiana Lease Additions

MRD continues to increase its ownership in North Louisiana through acreage acquisitions and an active leasing program.  As of February 1, 2016, assuming the full exercise of the acreage option agreement to lease acreage in North Louisiana, MRD had 241,130 gross (219,654 net) acres in and around the Terryville Field, which represents a 326% increase in net acres since its initial public offering in June 2014.

 

 

As of December 31, 2014

 

As of February 1, 2016

 

 

Gross

 

Net

 

Gross

 

Net

Over-Pressured Lower Cotton Valley:

 

 

 

 

 

 

 

 

Terryville Complex

 

73,737

 

61,157

 

202,227

 

180,901

NLA Acreage Option

 

-

 

-

 

38,903

 

38,753

 

 

73,737

 

61,157

 

241,130

 

219,654

Other:

 

 

 

 

 

 

 

 

Other Louisiana

 

49,198

 

44,291

 

13,653

 

8,342

Total Acres

 

122,935

 

105,448

 

254,783

 

227,996

 

Note: Table gives effect to MRD's full exercise of the NLA Acreage Option, which is exercisable through February 2017

 

Link to complete report:

http://investor.memorialrd.com/releasedetail.cfm?releaseid=956700

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