Well, we will see how the market responds to the lowered distribution by ARP. Not sure if my trade will be profitable or not.
Bottom line is distribution of 56 or 57 cents vs guided up to 65 cents per Q in the next 2 quarters.
Big miss but stock is very cheap.
Nothing worse then to over promise.
jim
Operations Update
ARP continued to develop its oil & gas properties in the third quarter 2013, further expanding several key operating areas.
Edward E. Cohen, Chief Executive Officer, commented, “Our well results in recent months have been exhilarating. But we are not immune from adverse outside phenomena --- natural disasters, third-party delays in providing infrastructure, reductions in forward “strip” prices, and so forth. Achieving or exceeding the upper end of our new guidance range of $2.60 in 2014 depends largely on performing in line with or better than analysts’ expectations in our operating areas, in syndication achievements, and in new growth opportunities. We’ve often done it before, and I’m confident that we’ll do it again.”
Matthew A. Jones, President, added, “Few would have anticipated the scale of our growth during the first 18 months of ARP’s existence --- a short time during which we have expanded our proved reserves by over 700% while increasing distributions to our unitholders by a peer-leading 40%. We believe that we will continue to accelerate growth in 2014 and beyond.”
During the third quarter 2013, ARP connected eight horizontal Marcellus Shale wells located in Lycoming County, PA, which demonstrated exceptionally strong initial flow rates. Despite limitations of infrastructure that have inhibited operation at full capacity, total gross daily production from the eight wells reached maximum pipeline capacity of approximately 62 Mmcfd. The characteristics of these well sites are highly favorable compared to other wells in the region due to: the thickness and depth of the shale in the area, level of porosity (~10-14%), permeability (up to 400 nD), TOC (up to 6%), and a high pressure gradient (~0.89 psi/ft). Nonetheless, ARP has experienced substantially lower than expected natural gas revenues from these wells due to weakness in Transco-Leidy Line pricing.In September 2013, ARP began connecting its five initial wells drilled in the Utica-Point Pleasant formation in northern Harrison County, OH. Early results indicated higher levels of high-grade condensate than originally expected. ARP had previously secured capacity to several processing plants in the area, namely the Natrium and Hastings plants via Blue Racer Midstream’s gathering system. A major fire occurred at the Natrium processing plant on September 21st, causing the plant to shut down and, subsequently, forcing ARP to temporarily shut in the Harrison County wells. ARP has successfully made arrangements in the interim to send a portion of the Harrison County production to other plants, and several of the wells have been brought back online at limited production. ARP is in the process of identifying additional third-party capacity in order to optimize production.ARP has drilled approximately 40 wells to date in the oil and liquids rich Marble Falls play, primarily in Jack County, TX in which the Company holds approximately 75,000 net acres. ARP has now identified additional productive zones located above and below the Marble Falls play, including the Caddo formation, Bend conglomerates and Chappel Reefs. Early testing of these formations has yielded initial production rates of 100-300 barrels of oil per day. Additional 3-D seismic is being undertaken to further develop these formations in conjunction with the Marble Falls.ARP continues to experience favorable results from approximately 466 billion cubic feet (“Bcf”) of proved reserves in the Raton (NM), Black Warrior (AL) and County Line (WY) basins, which were purchased from EP Energy in July 2013. To date, the assets have been producing at rates higher than the Company’s forecasted expectations. ARP has also identified a number of high-returning work over opportunities on Raton and Black Warrior locations that are expected to be completed over the coming year.Current Hedge Positions
ARP continues to manage its exposure to oil & gas prices using financial derivatives, primarily through swaps and costless collars. The Company is presently hedged over 80% of expected 2014 natural gas volumes, and approximately 75% of expected 2014 oil volumes. A schedule summarizing ARP’s current hedge positions is provided at the end of this release.
Financial Outlook
As described above, during the third quarter 2013, ARP connected its first wells in the Utica Shale in eastern Ohio and in the Marcellus Shale in northeastern Pennsylvania. Although the results from these wells have been exceptionally strong, the Company’s revenues from northeastern Pennsylvania have been adversely affected by substantial, but expected to be temporary, natural gas price disruption on the Transco Leidy Line, and by the recent fire at Dominion’s Natrium processing facility. In addition, although the Company is heavily hedged, forward NYMEX strip prices for natural gas and natural gas liquids (NGL) have been lower in the third and fourth quarters of 2013 than anticipated in ARP’s initial guidance. Accordingly, ARP expects to distribute between $0.56 and $0.57 per unit for the third quarter 2013 and between $0.58 and $0.62 per unit for the fourth quarter 2013. Based on the midpoint of the fourth quarter guidance range, this represents a 25% increase from the fourth quarter 2012 distribution, and a 50% increase from the Company’s initial full quarterly distribution in July 2012.
ARP is also updating its full year 2014 per unit distribution guidance to a range of $2.40 to $2.60 per unit, representing growth of approximately 10% to 20% compared to the current 2013 distribution forecast. This change is largely due to a more modest outlook for natural gas and NGL commodity prices between our last guidance and the present time, which are based upon NYMEX forward prices. In addition, ARP’s present forecast reflects its current expectation of the timing of shared general and administrative expenses between the Company and another subsidiary, sponsored by ARP’s parent, Atlas Energy, L.P, which will be active in exploration and production. Note that forecasted distribution amounts do not incorporate any future acquisitions of producing oil & gas properties, and all distribution amounts are subject to board approval.
These forecasted distribution amounts above set forth management’s best estimates based on current and anticipated market conditions and other factors. While we believe these estimates and assumptions are reasonable, they are inherently uncertain and subject to, among other things, various assumptions, including among others, ARP’s expected future production levels and operating costs in various basins in which ARP operates, the timing and amount of funds raised and deployed from ARP’s syndicated partnership business, ARP’s ability to hedge commodity prices, its ability to access the capital markets to finance future capital expenditures and acquisitions, and its assumptions regarding required maintenance capital expenditure levels, as well as other risks and uncertainties that could cause actual distributions to differ materially from what we have forecasted, as set forth under “Cautionary Note Regarding Forward-Looking Statements” below.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release might not occur and actual results, performance or achievement could differ materially from that anticipated or implied in the forward-looking statements. |
