Good News on Chesapeake : $5.4 Billion Divestment.

Readers will note that we have been out of CHK for a very long time but today’s news marks a real turn in the company . Finally it will have a substantial reduction in the debt that kept our manged accounts away from the sector and this stock in particular.

Chesapeake Energy Corp. (CHK), the company that forced out its co-founder last year amid an investor revolt, plans to sell natural gas and oil shale fields to Southwestern Energy Co. (SWN) for $5.4 billion in its biggest-ever divestment.

The transaction includes 1,500 wells and drilling rights across 413,000 acres in the southern Marcellus Shale and eastern Utica Shale in Pennsylvania and West Virginia, Oklahoma City-based Chesapeake said in a statement today.

Chief Executive Officer Doug Lawler is exiting some shale prospects to devote drilling crews and rigs to oil-rich formations that have delivered rates of return in excess of 20 percent. Before today, Chesapeake had sold or spun-off more than $3 billion in gas fields, office buildings, pipelines and rigs this year, as it unwinds deals done by former CEO Aubrey McClendon.

Today’s announcement marks a major step in Chesapeake’s transformation and a dramatic improvement in our financial strength as we seek to maximize value for our shareholders,” Lawler said in the statement.

The transaction, which is expected to close before the end of the year, won’t impact Chesapeake’s production growth targets, Lawler said. Chesapeake, which had fallen 31 percent this year, surged 11 percent to $19.65 at 8:45 a.m. in New York, before the start of regular trading. Southwestern fell 5.3 percent to $33.80.

Reserves Boost

For Southwestern, the transaction represents the first major foray into oil-rich shale for a company that has been almost exclusively focused on gas production. Wells that are part of the deal produce the equivalent of 56,000 barrels of crude a day, 45 percent of which is oil and so-called gas liquids such as propane. The acquisition also is Southwestern’s largest-ever deal, according to data compiled by Bloomberg.

The purchase will increase Houston-based Southwestern’s reserves by one-third to the equivalent of 890 million barrels of crude at a cost of about $24 per barrel.

“We think the sale is transformational for both parties,” Scott Hanold, an analyst at RBC Capital Markets, said in a note to clients today.

A shortage of gas-processing plants and pipelines in the Appalachian region could delay Southwestern’s plans to expand output from its new assets. Those bottlenecks should ease in the coming years as more infrastructure is added, Hanold wrote.

Dismantling Empire

In an internal e-mail today, Lawler announced plans for a town hall-style meeting with employees on Oct. 20 to discuss the impact of the sale and long-term growth plans. Senior managers and human resources executives have already met with employees at the affected divisions to talk about transitioning to Southwestern, he said in the e-mail.

Chesapeake announced plans in July to expand in the Rocky Mountains amid Lawler’s campaign to reduce costs, unload unprofitable gas fields and untangle complex financing arrangements created during the reign of his predecessor.

Since becoming CEO two months after McClendon’s dismissal in April 2013, Lawler has outperformed the average gas and oil production estimates of analysts in quarterly Bloomberg surveys.

Southwestern expects to sell equity and debt before closing to finance the transaction. Bank of America Corp. advised Southwestern and will provide a $5 billion bridge loan.

Statoil ASA (STL), co-owner of some of the West Virginia and Pennsylvania assets, has 30 days to acquire the stake at the agreed price, Southwestern said.

(Southwestern scheduled a conference call for 11 a.m. New York time. To listen, dial 877-407-8035 in the U.S. and 201-689-8035 from overseas.)

Oil Enters Bear Market

Brent Falls to Lowest Since 2010 After IEA Cuts Forecast

Brent crude fell to the lowest level in almost four years after the International Energy Agency said oil demand will expand this year at the slowest pace since 2009. West Texas Intermediate slipped for the fifth time in six days.

Futures dropped as much as 3.1 percent in London and 2.1 percent in New York. Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, the Paris-based agency said in its monthly market report. U.S. crude supplies probably grew by 2.5 million barrels last week, according to a Bloomberg survey of analysts before a report from the Energy Information Administration on Oct. 16.

Oil futures have collapsed into bear markets as shale supplies boost U.S. output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than trim output. Saudi Arabia won’t alter its supplies much between now and the end of the year, a person familiar with its oil policy said on Oct. 3.

“The IEA report is killing Brent,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “This is the fourth month in a row where they’ve cut their demand forecast. There’s tremendous downside risk for the market.”

Fourth Month

Brent for November settlement declined $2.54, or 2.9 percent, to $86.35 a barrel on the London-based ICE Futures Europe exchange at 10:24 a.m. in New York. It slipped to $86.17, the lowest intraday price since Dec. 1, 2010. The volume of all futures traded was 68 percent above the 100-day average for the time of day. Prices have decreased 22 percent this year.

WTI for November delivery dropped $1.71, or 2 percent, to $84.03 a barrel on the New York Mercantile Exchange. The contract settled at $85.74 yesterday, the lowest close since December 2012. Volume was 72 percent higher than the 100-day average. The U.S. benchmark grade traded at a $1.96 discount to Brent, down from $3.15 at yesterday’s close.

The IEA reduced its estimate for demand growth this year for the fourth month in a row, meaning oil consumption will expand by about half the rate of 1.3 million barrels a day anticipated in June. The IEA cut its 2015 demand growth forecast by 100,000 barrels a day to 1.1 million. About 200,000 barrels a day less crude will be needed from OPEC this year and next than estimated previously, the agency said.

Market Share

OPEC, which supplies about 40 percent of the world’s crude, is raising output as its members compete for market share while seeking to meet increased domestic demand. The group pumped 30.935 million barrels a day in September, the most since August 2013, according to a Bloomberg survey. The gain was led by Libya, where output climbed by 280,000 barrels a day to 780,000, the fifth straight increase.

“The recovery in Libyan oil production has pushed up total OPEC output at a time when demand growth is slowing,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “OPEC has a serious problem.”

Iraq said on Oct. 12 that it will sell its Basrah Light crude to Asia at the biggest discount since January 2009, following cuts by Saudi Arabia and Iran. Middle East producers almost always follow the lead of Saudi Arabia, OPEC’s largest member when setting export prices. The Saudis need to deepen price cuts for Asia by between 70 cents and $1 a barrel to restore a competitive position against other Middle Eastern and West African suppliers, according to JPMorgan Chase & Co.

Divergent Views

Oil ministers from Kuwait and Algeria have dismissed possible output cuts as the price slump prompted Venezuela to call for an emergency OPEC meeting. The group is scheduled to gather on Nov. 27 in Vienna.

The EIA, the Energy Department’s statistical arm, will release its weekly petroleum inventory report on Oct. 16 at 11 a.m. in Washington, a day later than usual because of yesterday’s Columbus Day holiday. Crude supplies rose 5.02 million barrels to 361.7 million in the week ended Oct. 3, the biggest increase since April, EIA data showed.

“The market isn’t expected to get any relief from Thursday’s inventory numbers,” Yawger said. “We’re looking for it to show a substantial build in crude supplies, coming on top of a 5 million-barrel build the previous week. There’s plenty of crude on hand.”

The report will probably show that gasoline stockpiles dropped by 1.55 million barrels in the week ended Oct. 10, according to the median estimate in the Bloomberg survey of eight analysts. Inventories of distillate fuel, a category that includes diesel and heating oil, are projected to have slipped by 1.65 million barrels.

Fuel Prices

Encana Corporation Update

ECA : NYSE : US$21.59
ECA : TSX
HOLD 
Target: US$25.00 

Energy — Oil and Gas, Exploration and Production
FRIDAY NIGHT LIGHTS
We maintain our HOLD rating but raise our target to $25 (from $24) post
ECA’s announced planned acquisition of Athlon Energy (ATHL : NASDAQ :
$58.32 | HOLD, covered by Eli Kantor). We applaud ECA for a high-quality
entry into a premier U.S. oil play; one that has multi-zone upside potential.
However, we do believe there are some key questions that need to be
addressed over time:
1. Are the 50 MBOE/d 2015 average and 200-250 MBOE/d by 2019 targets
achievable? Yes, in our view; but it will require improvements in drill
times. Prior to ECA’s announcement, Canaccord Genuity estimated 2015
production for ATHL to be 41 MBOE/d. Now this assumes about $965
million of capex and 6 rigs by year-end. Nevertheless, even when
assuming the 7 rigs by year-end 2015 that ECA plans to go to, we are
still short ~5 MBOE/d of ECA’s 50 MBOE/d target for the year. With
respect to the longer-term target, assuming 7 rigs per year still gets us
to only about 140 MBOE/d average for 2019. The aforementioned
assume a spud to rig release timing of 27 days. Therefore, reducing it to
15 days, which is in line with what Pioneer Natural Resources (PXD :
NYSE : $201.96 | HOLD, covered by Eli Kantor) is targeting, yields ECA’s
targets. However, there is one other potential bottleneck for the outer
years, and that is infrastructure (i.e. plants) to handle the increased
production capacity that ECA is targeting as well as potential cost
inflation/capacity constraints due to increased services competition.
2. Did the company pay up for the asset? Yes, to an extent. As shown in
Figure 1, the transaction is about 20% dilutive on an EV/DACF basis.
Even when assuming 50 MBOE/d of production in 2015 for ATHL, it is
still 15% dilutive. However, there is some accretion on an NPV basis
when assuming over 5,000 hz locations (vs. the 1,850 locations ATHL
assumes which looks conservative as we discuss later in this note),
hence our target increase. Also it used high priced PrairieSky paper to
help fund the acquisition.
3. Will ECA be successful in retaining ATHL employees? Only time will tell
on this one. If the ATHL management team sets up a new company,
there is risk of departures, albeit limited in the near-term by any
potential non-competes imposed on top management of ATHL

Continental Resources BUY

CLR : NYSE : US$72.88
BUY 
Target: US$92.00

COMPANY DESCRIPTION:
Continental Resources is a U.S. exploration and
production company with operations in the Williston
Basin (ND & MT) and the SCOOP play (OK). CLR is
headquartered in Oklahoma City, OK.
Energy — Oil and Gas, Exploration and Production
A LARGE SERVING OF THE WB WITH A “SCOOP” ON TOP; INITIATE WITH BUY
Investment recommendation
CLR is the largest leaseholder in the Williston Basin (WB) with 1.2 million
net acres and is also an industry leader in downspace and enhanced
completions testing in the play. Successful downspacing can add
meaningful value for shareholders, as could increased EURs from
improved completion techniques. Additional upside could come from the
development of the SCOOP in Oklahoma, where the company is the
largest leaseholder and producer in the play. CLR’s upcoming analyst day
could provide meaningful catalysts on all fronts. We initiate coverage with
a BUY rating and $92 price target.
Investment highlights
 Continued success in WB downspacing can add further upside to
NAV. CLR will conduct three more 660 foot (160-acres) density tests
this year, the results of which could serve as major catalysts when
released, likely by year’s end. Its first such test in McKenzie County
posted strong IP rates in the Bakken and the Three Forks (TF)
benches. These next three pads will target other areas of the WB.
 We feel enhanced completions techniques, including the use of
slickwater fracs and increased proppant volumes, should have a
positive impact on EURs going forward. CLR’s latest wells employing
these techniques have solidly outperformed offset wells. It plans more
enhanced completions at its next high-density pads.
 We believe the SCOOP will continue to grow at very robust rates
(~50% Y/Y in 2015E) and thereby bolster CLR’s oil/condensate
volumes in the coming years. The testing of extended and stacked
laterals are positive steps, in our view, towards adding further upside
to its already solid position in that play.
 The company is on very solid ground with regard to liquidity, in our
view. Combined with internal cash flow generation, CLR should have
more than ample capital to fund WB and SCOOP development.
Valuation
Our $92 price target is based on a 10% discount to a ~$103 NAV

Bulls Fleeing Natural Gas

Bulls Fleeing Natural Gas as Goldman Sees Further Decline
Speculators are fleeing natural gas after prices dropped below $4 for the first time since December and power plant production fell to a 13-year seasonal low.

Hedge funds reduced net-long positions, or bets on rising prices, by 11 percent in the week ended July 22, the U.S. Commodity Futures Trading Commission said. Bullish wagers have declined 51 percent since February.

Futures slid as the output from electricity generators, the biggest consumers of the fuel, fell 11 percent in the week ended July 19 from a year earlier to the least for the period since 2001, according to the Edison Electric Institute. Mild weather and a record pace of inventory gains may push prices lower in the next three months, Goldman Sachs Group Inc. said.

“The move down in prices this early in the summer is surprising,” Breanne Dougherty, a natural gas analyst at Societe General SA in New York, said in a phone interview on July 25. “The power generation load makes and breaks summers and it’s extremely sensitive to weather.”

Natural gas dropped 7.9 percent to $3.772 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. The contract for August delivery closed at $3.781 on July 25, capping a sixth weekly decline, the longest stretch of losses since the first quarter of 2010. It was at $3.771 in electronic trading today.

Gas Supply

Gas inventories, which declined to an 11-year low in late March, have rebounded at the fastest pace since 2001, U.S. Energy Information Administration data show.

Stockpiles rose by 90 billion cubic feet to 2.219 trillion in the week ended July 18, a gain bigger than the five-year average for the 14th straight week, according to the EIA.

“While we previously believed that risks to 2014 prices were skewed to the upside, we now see downside risks to U.S. gas prices in the next three months,” Daniel Quigley, a Goldman analyst in London, said in a note on July 22.

Power generation in the lower 48 states totaled 82,614 gigawatt-hours in the seven days ended July 19, the least since the week ended June 13, Edison Electric data show.

This month has been the coolest July since 2009, Matt Rogers, the president of Commodity Weather Group LLC in Bethesda, Maryland, said in an e-mail on July 25. “We’re expecting the cool pattern to continue into August.”

Power Plants

Gas deliveries to power plants dropped 13 percent this month to average 25.9 billion cubic feet a day as of July 25, the lowest for the period since 2009, according to LCI Energy Insight in El Paso, Texas.

Futures may find support between $3.50 and $3.75 for the rest of the stockpiling season, with those prices prompting power plants to switch from coal, Teri Viswanath, the director of commodities strategy at BNP Paribas SA in New York, said by phone on July 24.

“The problem with the emergence of this cool fall-like weather is that we don’t expect to see a slowdown in those inventory injections until the reemergence of heating demand,” she said.

In other markets, the downing of a civilian airplane in Ukraine and crude stockpiles at Cushing, Oklahoma, at a six-year low enticed speculators back to the oil market, boosting bullish bets from a six-month low.

Money managers raised net-long positions in benchmark West Texas Intermediate futures by 7.3 percent to 278,116 futures and options combined in the week ended July 22, CFTC data show. Long positions rose 1.1 percent 307,739 while shorts dropped 35 percent to 29,623.

WTI Jump

WTI futures advanced 4.5 percent to $104.42 a barrel on the Nymex in the period covered by the report. The contract closed at $102.09 on July 25.

Net long gasoline bets fell 22 percent to 34,115. Futures slipped 0.6 percent to $2.8807 a gallon on the Nymex in the week covered by the report and settled at $2.8653 on July 25.

Gasoline at U.S. pumps, averaged nationwide, slid 0.7 cent to $3.543 a gallon on July 24, the lowest since March 28, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring group. Retail prices are down 4.1 percent from a 13-month high on April 26.

Money managers’ bets on ultra-low sulfur diesel flipped to a net short position for the first time since November with 1,520 contracts, the CFTC report showed. Futures fell 0.1 percent to $2.8542 a gallon in the report week and closed at $2.9157 on July 25.

Natural Gas

Net-long positions on four U.S. natural gas contracts declined by 25,772 futures equivalents to 201,090, the least since Dec. 3.

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

Long positions fell by 4 percent to 472,613, the least since February 2013. Bearish bets gained 2.3 percent to 271,523, the most since Dec. 10.

“I wouldn’t expect prices to go much lower,” said Societe Generale’s Dougherty. “That said, if we continue to get extremely mild weather as we saw in July through October, we will see a slightly different story.”

Penn Virginia Corporation OVERSOLD, REITERATE BUY

PVA : NYSE : US$14.78
BUY 
Target: US$20.00

Energy — Oil and Gas, Exploration and Production
TWEAKING ESTIMATES FOLLOWING
ASSET SALE NEWS; STOCK OVERSOLD, REITERATE BUY
Investment recommendation
PVA has been successfully transitioning to a liquids-focused company
while retaining its leverage to an improvement in natural gas prices.
The company has built a sizeable ~87K net acre position in the volatile
oil window of the Eagle Ford (EF) and has generated solid results with
the drillbit while bringing costs down at the same time. We remain
buyers, especially after the recent correction in the stock.
Investment highlights
 PVA announced that it has entered into a definitive agreement to
sell its Mississippi assets to an undisclosed buyer for gross cash
proceeds of $72.7M. The sale is expected to close next month. Our
expectations were that the company would get something closer to
PV-10 for these assets, which was ~$55M at YE 2013, and are
therefore pleased with the $72.7M price tag. Further liquidity
enhancing asset sale announcements should be forthcoming shortly.
 The stock sold off for two days (before rebounding yesterday) over
concerns about the company’s EF EURs. EURs have not gone down;
PVA is now showing both its internal estimates, which it recently
raised, and its reserve engineer’s EURs, which are more
conservative.
 As a reminder, PVA recently upped its EF inventory by 34% (now
1,510 gross locations, up from 1,125) as it is now including the
Upper EF as a distinct horizon (475 gross locations)

Painted Pony – Update/ NR

Painted Pony Petroleum (PPY-TSE)

Proving out the plan, on route to 20,500 boe/d in 2015 Investment highlights:

Painted Pony released Q1 results yesterday that were largely in line with expectations. More importantly the release contained a positive operational update that left us with three key takeaways:
1. The recent step change in Montney well rates
resulting from a switch in completion methods
is not only continuing, it appears to be getting
even better.
2. PPY appears well on pace to reach its 2015
production target of 20,500 boe/d in 2015
(annual average), in our view. This represents
an increase in production per share of ~55%
this year and another ~55% per share in 2015.
3. On our updated numbers PPY is no longer
expensive on cash flow multiples; in fact, it is
trading at a discount to its peers, despite the
growth profile, and extensive running room in
the Montney. Historically PPY has traded at
~15x EV/DACF, but on our increased
estimates it is now trading at just 6.5x 2015E
EV/DACF versus its gas weighted peers at
7.3x.
In our view, the above highlights are significant developments for Painted Pony. Despite the strength in PPY’s share price in recent months, we believe the stock is poised to move
significantly higher, as the company continues to execute on its aggressive growth plan. Painted Pony remains our  favorite pick in the natural gas space.

Penn Virginia Corporation

PVA : NYSE : US$14.76

BUY 
Target: US$20.00

 UPPER EF TEST DELIVERS THE GOODS; REITERATE BUY
Investment recommendation
PVA has been successfully transitioning to a liquids-focused company
while retaining its leverage to an improvement in natural gas prices.
The company has built a sizeable ~86K net acre position in the volatile
oil window of the Eagle Ford (EF) and has generated solid results with
the drillbit while bringing costs down at the same time. We would be
buyers, especially after yesterday’s sell off.
Investment highlights
 In the EF, the company completed 16 (12.9 net) operated wells and
two (0.9 net) non-operated wells. EF production was 15.2 MBoe/d in
Q1, up 15% Q/Q, despite many completions coming later than
expected. PVA also increased its EF acreage to 85.9K, up 6.4K net
acres from last quarter and acquired at an attractive ~$3,000/acre.
 The Upper EF test yielded very solid results. The Welhausen #A2H,
drilled with a ~6,000 foot lateral and 26 frac stages, came on at a
peak gross IP rate of 2,165 Boe/d. Notably, this rate was higher
than the 1,767 Boe/d Devon posted in its presentation last week
which was based on 18 frac stages.
 PVA raised its EF inventory by 34% as it now includes the Upper EF
as a distinct horizon (475 gross locations). This increased inventory
figure is before giving any credit to overlapping locations, which the
company believes could add up to 400 additional locations. We are
now assigning value to the Upper EF in our NAV model, but we
believe there is still more upside as the bench is further de-risked.
Valuation
Our new $20 price target represents a 10% discount applied to a
~$22.20 NAV. Our prior $19 target reflected the same discount to a $21 NAV

Magnum Hunter Resources

MHR : NYSE : US$7.34
BUY 
Target: US$10.00

 

COMPANY DESCRIPTION:
Magnum Hunter Resources is an oil-leveraged
independent oil and gas company, engaged in low-risk
development and exploration in the Williston Basin and
Appalachian Basin (Marcellus and Utica Shales).

MARCELLUS AND UTICA LEADING THE CHARGE 

Investment recommendation
MHR has built solid asset bases in the Marcellus and Utica Shales as
well as the Williston Basin (WB). We believe a renewed focus on the drill
bit and deleveraging the balance sheet (with further asset sales) should
continue to act as positive catalysts for the stock going forward.
Investment highlights
 Growth continues to be driven by the Marcellus and Utica. The
company expects to bring on a third rig here in the near future, and
wells targeted to be brought online between now and YE 2014 are
expected to add ~31 MBoe/d in net production; this is greater than
the company’s entire output from continuing operations in Q1/14.
MHR remains comfortable with its 2014 production exit rate
guidance of 32.5 MBoe/d from continuing operations.
 MHR continues to build up the value of its Eureka Hunter
midstream business. As of April 2014, the Eureka Hunter’s
gathering flow through recently hit a peak rate of 236 MMcf/d. With
the completion of expansion projects currently under construction,
the company expects that Eureka Hunter will have a throughput
capacity of 1.2 Bcf/d by YE 2014.
 The company has done a good job enhancing its liquidity. As of May
6, 2014, MHR had total liquidity of ~$131.2M. To further enhance
its liquidity, the company is pursuing additional non-core asset
sales. It expects to close such potential sales throughout the
remainder of 2014. MHR has already sold its Canadian WB assets
for US$68M, which is expected to close this week.
Valuation
Our $10 price target represents a 20% discount to a ~$12.50 NAV

Talisman and Painted Pony – updates

TALISMAN ENERGY (TLM-TSX): Sale of
Eagle Ford on the horizon?

Look at that trading range with an $11 base and
$13 ceiling. What’s the catalyst to take it
beyond that $13? Carl Icahn & American
buyers?

Call it a comeback? Shares of TLM jumped after
the company posted strong Q1/14 earnings, driven
by higher North American gas and liquids prices,
increased liquids volumes and a gain on the sale of
assets. Additionally, Q1/14 production of 384
MBOE/d (includes assets held for sale) was also
above expectations. The EPS beat Skolnick’s (CG)
estimate was a result of better-than-expected
production as well as lower-than-forecast royalties
and unit op-costs. Having reached the lower end of
the prior US$2-3 billion in targeted divestments
faster than the expected 18 month timeline,
management remains confident in hitting its next
US$2 billion target. Furthermore, according to a
Bloomberg article, both TLM and its 50% JV
partner, Statoil (STO), are considering selling
their joint venture in the Eagle Ford, which
could fetch more than US$4 billion total

PAINTED PONY PETROLEUM (PPY-TSX ): DO YOU BELIEVE IN NATURAL GAS?

Shares of Painted Pony Petroleum are down from their $12.14 highs of last month. PPY reports Q1/14 results on Tuesday, May 13 (after market close). Canaccord Genuity Energy Analyst Anthony Petrucci is expecting a positive operational update, including robust production numbers, further color on improved completion techniques and likely an increased bank line. This is a company that expects to increase production by 50% per share this year and another 60% per share next year. Recent production numbers suggest they are ahead of their forecast pace. The company’s five-year plan has them reaching 100,000 boe/d in 2018 (current production of ~13,500 boe/d). They could potentially reach that level just by drilling
on existing drilling pads, and would only have drilled <15% of potential drilling locations.

Given the company’s forecast production next year of 20,500 boe/d, Petrucci says PPY is now trading at just 5.7x 2015 EV/DACF.

Recent well performance is well ahead of type curve (~30% better) given an adjustment
in completion techniques. The biggest risk to PPY’s model is natural gas prices, as the geological risk has been significantly reduced given the extensive delineation drilling the company undertook prior to its development drilling program. If natural gas prices hold in Petrucci believes PPY will be successful in reaching its lofty production targets.

 

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