Leslie’s Notebook

• Analysis of the reported 2007 finding and development costs for most E&Ps continues, with each Wall Street firm slicing and dicing the data in different ways. One thing is clear –resource plays reign supreme.
• Increasingly, that means gas shales like the Barnett in North Texas and the Deep Bossier (Haynesville) in East Texas, or the Bakken oil play in North Dakota. But certainly when a company is drilling wells that flow 2- to 4 million, as in the Barnett and Fayetteville, or even 8 million cubic feet a day, as in North Dakota, that offsets a lot of big AFEs and high per-acre lease costs.
•  A Morgan Stanley report says that in 2007, for 17 E&Ps, F&D costs ranged from a low of $5.45 per barrel of oil equivalent for Ultra Petroleum, to a high of $35.03 per barrel for Talisman and $19.20 for Chesapeake. (This is an all-in number that includes exploration expense, development and acquisitions.) 
•  Analyst Lloyd Byrne’s report says, “The most recent E&P quarterly results (1Q 08) show rising cash netbacks (up 27% year-over-year)…despite rising cash operating costs (up 13% Y-O-Y).”
• Meanwhile, full-year drill-bit F&D costs for XTO Energy were just $1.36 per Mcfe, which was well ahead of Coker & Palmer’s drill-bit F&D estimates of $1.50 per Mcfe. More impressive is the company’s target of 15 Tcfe by year-end 2009. With an impressive inventory of development opportunities, XTO should be poised for consistent reserve growth over the next several years, the analysts say. 
• “ Further augmenting the impressive reserve and production growth, XTO has added 76,000 net acres in the San Juan Basin and Barnett, Fayetteville and Woodford shales for $1 billion. The acreage currently has 212 Bcfe of proved reserves and is currently producing 35 MMcfed. 
•  The growth driver for XTO continues to be East Texas and the Barnett Shale which make up about 50% of the company’s production. Coker & Palmer sees these assets as the backbone of the company, but with emerging assets including the Fayetteville, Woodford and Piceance, XTO should enjoy several years of high-quality, low-risk growth.

 –Leslie Haines, Editor in chief, Oil and Gas Investor, lhaines@hartenergy.com

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