Energen Corporation has increased its 2011 capital spending plans, production estimates, and earnings guidance range to reflect the first-year impact of its two latest Permian Basin acquisitions: (1) a Wolfberry package expected to close this month and (2) a Bone Spring acreage package that closed today.

The diversified energy company is increasing its capital spending plans at Energen Resources Corporation, its oil and gas exploration and production business, to a record $667 million (prior 2011 guidance was for $510 million). Of this amount, more than 80 percent will be deployed in the oil-rich Permian Basin. Reflected in the company's new capital budget are an additional 56 Wolfberry wells and another 8 Bone Spring wells. Energen Resources also has added capital for additional drilling rigs in the Permian Basin; the company expects to run 14-15 rigs in 2011, up from approximately 6-8 rigs in the prior guidance.

The company's production forecast for 2011 is now 123 billion cubic feet equivalent (Bcfe), reflecting 9 percent growth over its 2010 estimated production (prior 2011 production guidance was 120 Bcfe). Oil and natural gas liquids (NGL) production is expected to jump 20 percent from 2010 to 2011 and comprise more than 40 percent of total estimated production.

Given the significant drilling inventory and limited current production of Energen Resources' latest Permian Basin acquisitions, associated production in 2011 will be relatively modest; however, Permian production is expected to grow substantially over the next 4-5 years. Based on the pace of development drilling and the risking incorporated into its acquisition models, Energen Resources' oil and NGL production could increase approximately 60 percent from 2010 to 2013.

As a result of changes to its 2011 production estimates, Energen is revising upward its earnings guidance by 5 cents to $3.25-$3.65 per diluted share; this guidance also reflects an expected increase in interest expense associated with the potential issuance of long-term debt to help finance recent acquisitions.

Tags: Energen Corporation