Our Business Strategy
Historically, we used acquisitions of producing properties with additional development drilling and workover opportunities and vertical drilling of development wells in established producing areas as our vehicle for growth. As a result of our acquisitions, we have accumulated an inventory of drilling locations and acreage holdings with significant potential in the Haynesville / Bossier and Marcellus shale resource plays. This shale potential has allowed us to shift our focus to exploit these shales primarily through horizontal drilling. Future opportunistic acquisitions are likely to be focused on increasing our shale resource holdings in the East Texas/North Louisiana and Appalachian areas. We will continue to develop certain vertical drilling opportunities in East Texas, North Louisiana, Appalachia and Permian as economic conditions permit.
We plan to achieve reserve, production and cash flow growth by executing our strategy as highlighted below:
• Develop our shale resource plays
We hold significant acreage positions in prominent shale plays in the United States.
Our operational focus has yielded significant improvements in drilling and completion efficiencies in our Haynesville program. By utilizing dedicated fracture stimulation fleets, the consistency in and efficiency of our fracturing operations continues to improve. We continue to work very closely with our midstream operations to plan the drilling and completion timing of our new wells, which allows us to flow new completions to sales promptly after fracture stimulation.
In our Appalachia region, our principal activities to date have been focused on technical evaluations of our acreage holdings, expansion of our technical staff, evaluation of test wells and our acreage position. Our significant held-by-production position allows us to dictate our continued enhancement of the pace of development in the Marcellus and Huron shales.
• Pursue joint venture opportunities
The shale resource plays are capital intensive and require significant expenditures for drilling, completing, treating and pipeline take-away capacity. In our Haynesville/Bossier shale play, we entered into joint venture transactions with BG Group to jointly develop the upstream assets and expand our midstream infrastructure. The Marcellus and Huron shale areas cover a geographic area which is significantly larger than the Haynesville/Bossier shale area. In the Marcellus and Huron shale plays, we also entered into joint venture transactions with BG Group to jointly develop the upstream assets and expand our midstream infrastructure in Appalachia.
• Expand our midstream assets
We jointly own a midstream company in our East Texas/North Louisiana operating area with BG Group. These assets enhance our ability to promptly hook-up our wells for delivery of our production to markets. In Appalachia, we intend to pursue similar midstream expansions as part of our operating strategy. These expansions will also provide opportunities to transport third party gas and generate incremental gathering and transportation fee income.
• Exploit our multi-year development inventory
Our prior strategy of acquiring producing properties created a portfolio with a multi-year inventory of shale and conventional drilling locations and exploitation projects. This inventory consists of step-out drilling, infill drilling, exploratory drilling, workovers and recompletions.
• Maintain financial flexibility
We employ the use of debt and equity, along with a comprehensive derivative financial instrument program, to support our business strategy. This approach enhances our ability to execute our business plan over the entire commodity price cycle, protect our returns on investments and manage our capital structure.
• Actively manage our portfolio and associated costs
We periodically review our properties to identify cost savings opportunities and divestiture candidates. We actively seek to dispose of properties with higher operating costs, properties that are not within our core geographic operating areas and properties that are not strategic. We also seek to opportunistically divest properties in areas in which acquisitions and investment economics no longer meet our objectives.
• Seek acquisitions that meet our strategic and financial objectives in our core operating areas
Historically, we have maintained a disciplined acquisition process to identify and acquire properties in our core operating areas that have established production histories and value enhancement potential through development drilling and exploitation projects. Our shale resource plays have created a shift in our acquisition focus from producing properties to opportunistic acreage acquisitions with additional shale potential.
• Identify and exploit upside opportunities on our acquired properties
Our acquisitions and their resulting shale upside have led to significant reserve addition opportunities above those identified at the date of acquisition. In our East Texas/North Louisiana area, we plan to aggressively drill horizontal wells, implement down spacing of wells, and recomplete existing wells to enhance our production and reserve position. In Appalachia, our focus will be directed toward unconventional drilling and exploitation of the Marcellus shale resource play. We continue to exploit our Permian assets, which have resulted in higher oil production than originally expected.