Magnum Hunter Resources' (MHR) CEO Gary Evans on Q1 2014 Results - Earnings Call Transcript

May. 9.14 | About: Magnum Hunter (MHRCQ)

Magnum Hunter Resources Corporation (MHR) Q1 2014 Earnings Conference Call May 9, 2014 10:00 AM ET

Executives

Paul Johnston - SVP and General Counsel

Gary Evans - Chairman and CEO

Joe Daches - SVP and CFO

Glenn Dawson - EVP of Williston Basin Division

Jim Denny - EVP of Appalachian Division

Chris Akers - COO

Analysts

Neal Dingmann - SunTrust Robinson Humphrey

Leo Mariani - RBC Capital Markets

Gabriele Sorbara - Topeka Capital Markets

Irene Haas - Wunderlich Securities

Chad Mabry - MLV & Company

Steve Berman - Canaccord

Dan McSpirit - BMO Capital Markets

Kim Pacanovsky - Imperial Capital

Operator

Good morning. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to the Magnum Hunter’s Financial and Operating Result for the First Quarter of 2014. (Operator Instructions)

Thank you. I’ll now turn the call over to Paul Johnston, Senior Vice President and General Counsel. Please go ahead sir.

Paul Johnston

Thank you, Laura. Good morning. Today is Friday, May 9, 2014. This is Paul Johnston, Senior VP of Magnum Hunter. Now I would like to welcome everyone to today's call. The principal purpose of the call is to discuss our first quarter 2013 financial and operating results, among other matters of interest regarding the company. We announced these results in a press release, which we issued earlier this morning. The press release is posted on our website.

Before we begin our presentation, I would like to advise you that today's call will include forward-looking statements within the meaning of the Federal Securities Laws, specifically Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our presentation will include statements regarding our projections, estimates, expectations, assumptions and future strategies. These forward-looking statements will relate to among other things, our revenues, production, capital expenditures, liquidity, drilling results, reserves, anticipated sales of non-core assets, midstream gathering throughput capacity and upstream and midstream operational matter.

These statements are qualified by important factors that could cause our actual results to differ materially from those reflected by the forward-looking statements, including the factors set forth in our Risk Factors sections of our SEC filings, including our 2013 annual reports on Form 10-K. This annual report also includes a glossary of certain industry terms that may be used in today's call.

The full forward-looking statements disclaimer is included in our press release issued this morning. This disclaimer is in effect for the duration of this call. Our press release also contains and our presentation today may include statements regarding certain non-GAAP financial measures. As part of the press release, we provided reconciliations of these non-GAAP financial measures to their most comparable financial measures calculated in accordance with GAAP. We refer you to our statements in the press release and in the form 8-K we filed this morning regarding these non-GAAP financial measures. These statements include our reasons for providing these the non-GAAP financial measures.

I will now turn the call over to Gary Evans, our Chairman and CEO.

Gary Evans

Thank you, Paul. And thank all of you for dialing in this morning we’re pleased to report our company’s first quarter 2014 financial operating results. Our call today we will have number of our management on the line that will be giving specific information regarding their area of expertise and their area of management.

Just to summarize briefly. We had revenues for the quarter of $70.2 million that’s 103% increase over the same quarter last year 2013. I bring market revenues [Indiscernible] subsidiary increased also similarly at 99% to $31.1 billion. Adjusted EBITDA for the entire increased 89% to $38.9 million.

Our production continues to increase to speculate our adjusted production was 17,241 barrels per day. That’s an increase over the prior quarter, the fourth quarter of last year. We’ve also talked about a lot of new wells and we’ll go into more detail there and we’re also pleased to report that we are continuing to make excellent progress on our asset divestitures of our non-core assets.

To summarize, we sold our Eagle Ford, Pearsall properties which was the remaining properties that we kept after the sale last year to Penn Virginia or those to an Australian company for $24.5 million. We also sold our Alberta, predominately gas properties in the first quarter for CAD$9.5 million which was $8.6 million U.S. And then we contracted to sell which is scheduled to close next week, our Tableland Field for CAD$75 million or $68 million U.S.

And we have a fourth item I am not going to give too much detail on because we haven’t signed our PSA but we got a LOI to sell some non-core properties up in North Dakota and that’s just under $30 million. So we’ll continue to make progress for negotiating on other asset sales as well and I think we will have others to plenty over the next 30 to 60 days.

So as we are outlined in our game plan at the end of last year and early this year. Our focus is to continue to become a core operator in three areas that be the Marcellus, Utica and the core North Dakota and the Bakken and Three Forks.

So with that I am going to turn over our next session of the call to Joe Daches our Senior VP and Chief Financial Officer, he’ll give a financial overview, Joe?

Joe Daches

Thank you, Gary. And good morning, everybody. The following are the financial highlights for Magnum Hunter’s first quarter of 2014. The company generated net loss attributable to common shareholder of $76.5 million or $0.44 per basic and diluted common share outstanding.

When adjusted for a combination of non-cash expenses and non-recurring gains on asset sales, the company’s adjusted net loss attributable to common shareholders for the three month ended March, 2014 was $0.15 per basic and diluted common share outstanding.

As Gary mentioned our revenues were $70.2 million for the quarter which was a 103% increase over the prior period and this increase is primarily attributable to increases in oil and gas production as a result of our expanded drilling efforts in Marcellus and Utica Shale plays as well as higher average realized commodity prices within the period.

Revenues from our midstream and marketing operations increase by $15.7 million of 99.1% to $31.6 million for the quarter this was driven primarily by strong marketing revenues and increase throughput on Eureka’s pipeline.

The throughput volume has also increased by 198% to $13.7 million MMBtu for the quarter compare to 4.6 MMBtu for the same quarter last year, a 197% of increase. In throughput, in Eureka Hunter averaged 132,625 MMBtu per day compared to 51,293 MMBtu for the prior period.

G&A expense for the quarter decreased to $15.3 million that was a 23.6% decrease compare to the same quarter in 2013. Our recurring G&A expenses for BOE with three months ended March 2014 decreased 55% to $5.35 per BOE from 1189 per BOE during the three months ended March 2013. And this was primarily due to production increases in the period, coupled with reduced professional services fees.

Our adjusted EBITDAX actual in Q1 was $38.9 million versus $20.6 million for Q1 in 2013 which is an increase of 89%. Our production increased by 110% to 1,332 BOE or 14,796 BOE per day for Q1 in 2014 compared 659,000 BOE or 7,320 BOE per day for the prior period. Our liquid mix of our productions stood at 46%.

Oil hedges; for 2014, we have approximately 46,000 barrels of oil per day hedge with the weighted average ceiling price of $100.90 with a weighted average floor price of $85. We also have natural gas hedges and for 2014 we have 31,000 Mcf per day hedge with the weighted average swap price of 423 as well as an additional 5000 of Mcf per day hedged with the weighted average ceiling price of five in a quarter and weighted average floor price of $4.

In 2015, we also had 20,000 Mcf per day hedged with the weighted average swap price up $4.18. Total CapEx related to our drilling and completion with our upstream divisions was $47.5 million for Q1 our midstream CapEx was $30.6 million and our leased hold acquisitions was $10.4 million.

2014 CapEx is expected to be $400 million total $260 million is dedicated to Marcellus Utica upstream including leaseholds. And $50 million for Williston upstream and $90 million net to our interest in the midstream development. As of May 6, 2014 Magnum Hunter had total liquidity of $135.1 million comprise of $99 million of availability under the senior revolving credit facility and $36.1 million of cash on hand.

As we announced May 7th, we have received favorable redetermination of borrowing base on our senior revolving credit facility as a result of our drilling and completion efforts in Utica and Marcellus shale,

These re-determine increased our borrowing based by $92.5 million. The company has a variety of options available to fund our CapEx plan including internally generated cash flow, new availability under our revolving credit facility, non-core asset sales that are already in process and possible capital market transactions. We will continue to evaluate these alternatives to fund our growth with the goal of aligning the best interests of the shareholders.

Back to you, Gary.

Gary Evans

Thank you, Joe. I would like to turn the call over to Glenn Dawson who is going to give us an overview of our operations up in Dakota and Williston Basin, Glenn?

Glenn Dawson

Good morning, thank you Gary. We had a pretty active quarter, we drilled four gross 0.7 net non-operated wells in our Ambrose core area in North Dakota. All two-mile wells, a combination in little of Middle Bakken and Three Forks Spanish completions. Very active on the completion front 13 gross completion having approximately but barrels a day net to our production.

That will change up our completion technique in our last six wells we’re gone into a plug-and-perf type operations and we’ve seen some pretty good favorable indications that this completion technique might increase our productivity to have more to report at Media on those six completions but as moving forward most of the completions will be this style.

Current production 4600 barrels a day, and we have about 600 barrels a day that is contracting just being ride it up and another 400 barrel a day behind a pipe waiting for fracture stimulation. Our costs are certainly a focus for us and our average drilling costs for 2-mile laterals was $6.2 million in the quarter, our target for the second half of the year is $5.8 to $5.9 million these are the AFPs that we’re currently looking at now for similar drills and completions.

Operating efficiency is certainly that we’re focusing on and we’re doing a lot ancillary work in field and we just committed oil volumes to a pipeline system that will be fully functional by August of this year, we’ll have 70 wells tied in the well head to this facility and another 50 wells will be trucked to new truck terminals and this is going to drop our trucking cost by about $1.50 to $2 a barrel over the project. We’re currently looking at about an average operating cost of about $95 to $100 a well month for our core Ambrose block which is about $9 a barrel and hoping to save $1.50 off of that by the end of the year.

How are we increasing our production relative to our natural gas times, and we’ve added 125 gross connections over the last year to our One Oak system. We’ve got 100 more to go in 2014; this is a big initiative for us. We’re currently producing about 350 barrels a day net NRI production through the One Oak system and we’ll be pleased to say, we have 95% of our wells tied in all the flaring flares out of sky by the end of 2014, which I think is a milestone for the company.

Relative to transactions that Gary eluded to you earlier we have looking forward to closing the sale of Williston Hunter Canada, which would be the Tableland properties in Saskatchewan, next week CAD$75 million transaction for 650 barrels a day NRI. We have highlights of this sale is, we have now received permission from the National Energy Board and FERC to build a pipeline from Saskatchewan into North Dakota, we’ll be constructing that starting next June. And that would bring in significant gas volumes to our dedicated rental contract and will help that our commitment to that arrangement. That’s all I had Gary.

Gary Evans

Thank you Glenn and let’s turn the call over to Jim Denny to talk about Appalachia division. Jim.

Jim Denny

Thank you Gary and good morning to all on the call, thanks for calling in. Again a good quarter in Appalachia. Starting with productions, last week was about 12,700 BOE a day but I should mention that we have about 2,500 BOE a day that we’ve recently shut in on our Stalder pad to continue development primarily of the Utica. From a summary standpoint from drilling; we drilled in case five wells first quarter, three Marcellus and two Utica but maybe more importantly we completed and have brought on -- are in the process of bringing on nine gross and six new wells. We continue to run two rigs at this time. One is completing the pilot; we should be logging later this evening or tomorrow on the first and the first Utica test in Tyler County West Virginia. We’re excited about and everything we’ve seen so far tends to be encouraging.

Our second rig is currently moving in on our Stalder pad, our plan is to drill four Utica wells on that pad where we have 50% working interest. We’ll continue we anticipate and we’ll continue to run those two rigs throughout the year. We will move the rig on the Winland Steward to a pad in Ohio to continue developing Utica. We anticipate picking up a third rig to drill incremental Marcellus wells on two existing pads, on our Weese pads and WVDNR pad in Wetzel County. That should shape up our year very nicely, we anticipate even with the two rig program some 26 additional wells, 26 gross 20 net.

So we’re shaping up extremely well, we continue to drive our cost down and to make progress with takeaway, we’re just as we brought on our three Ormet wells in Ohio in Monroe County, Ohio. So those are now floating to sales, just to remind everybody those are very wettest Marcellus wells, but Btu in excess of 1,400 and condensate north of 80 barrels per million and NGLs at around 120 barrels per million. So that should be a nice liquid rich platform that we’re bringing in and we anticipate further development there later in the year.

That’s kind of a highlight. I’ll wait for questions. Gary you take a section that I overlooked.

Gary Evans

That’s good Jim. We will take questions here in just a minute. I would like to introduce a new gentlemen to the group that’s listening. Chris Akers is our new Chief Operating Officer for Eureka Hunter, he’s actually house up in West Virginia and Chris has been on board about a month now. And I’ll let him kid of tell everybody what he’s been working on and introduce himself. Chris.

Chris Akers

Thanks Gary and good morning everyone. Just a little bit about my background. I have spend about 23 to 25 years in the industry about 10 of it with Dominion in various engineering and operations roles, and then 13 years at EQT at various commercial engineering and operations roles, ultimately finishing up as senior VP of operations for the Midstream Group.

So I am very excited to be here at the Magnum Hunter Organization and excited to run Eureka’s pipeline system.

First thing I want to cover is our current operations. Right now we’re moving about 220 MMBtu a day. We’re in the process of five major capital projects including 40 miles of major pipeline 20 inch and five new interconnects with interstate pipelines, we’re pretty excited about that. Hopefully by the end of year we’ll be moving about 400 MMBtu a day with full pipeline capacity of 1.3 Bcf a day. And also just kind of my background a little bit, can’t go over what our system looks like. Our system is well structured through the heart of Utica and Marcellus with that 1.3 capacity I think we’re really geared to grow.

And that’s all I have, any questions.

Gary Evans

Thank you Chris and I’m sure we’ll have some more questions here in a moment. To summarize the one things that I want to reconfirm that we announced this morning is that we feel very comfortable with our exit rate production number in light of the new drilling we’re doing in the Utica right now. At this time of the year it gives us ample time to get these wells completed. The wells that we’re drilling are right along our Eureka 100 pipeline system, so there is no midstream concern. So the 32,500 BOE a day and exit rate is obviously post some of these asset sales we’ve done, because originally it be five and we’re going to lose about 2,500 barrels a day from these sales.

So we feel good about that number and you continue to see the progress we’ve also referred to you new investment presentation on our web site and we’ve actually built (ph) quite a bit of specificity the new wells that we will be adding that have been added will be for the remainder of the year, so you can see where all that production growth is coming from.

So with that being said I’d like the operator to turn over our call to our first dial in.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Neal Dingmann with SunTrust. Your line is open.

Neal Dingmann - SunTrust Robinson Humphrey

Good summary, Gary. Gary, for you or Chris, wondering when you look at all these Utica wells coming on, either obviously with, around the Stalder, Stewart Winland, Farley, your thoughts as far as takeaway around there, number one. Then number two, Gary, are you able to add around like that Stewart Winland? And potentially, you've already talked about adding several more wells around the Stalder, besides that pad. Just your thoughts before the end of the year. How should we think about each of those three different Utica areas? How many wells can you hit in each of those areas?

Gary Evans

Well we drilled two Farley wells, the original Farley wells it was over, Northern Washington County right along the Noble County border and that is the only area where we drilled where we don’t have immediate pipeline connection. We thought, we probably would have drilled those wells now, had we known that the party we were negotiating to lay a line was not going to be successful. So we finally said forget it, let’s build our own line and that has delayed the completion of those wells over the west. Everything else we’re drilling meaning the Stalder, Stewart Winland and some others that we haven’t named yet are all going to be next to or adjacent to the Eureka Hunter pipeline system. So there is no issues on takeaway.

It’s also important to note that the Stalder and very likely the Stewart Winland will be 97% methane, so does not require any cryogenic processing. So that creates obviously additional challenges for Eureka Hunter but for the producer being Magnum Hunter we don’t have to process that gas. So we can use it to blend very rich Marcellus gas or take it directly to an interconnect. So one of the things that Chris is trying to accomplish obviously is getting many interconnects as possible. We have not had any problems with bottlenecks or moving gas in this area, we think we’re uniquely located being in the Southwestern part of entire Marcellus Utica play that gets us closer to the Gulf Coast closer to the Midwest that the bottlenecks you see at Pennsylvania and the huge basis differentials you see, we have not experienced.

Neal Dingmann - SunTrust Robinson Humphrey

Okay, and then, Gary, just your thoughts on, obviously there's always -- it seemed like there's some concern out there in liquidity, but you outline, I know, a number of sales. Just your thoughts, I guess when those sales, number one, I guess the timing potential. I know in the press release, I think you said you mentioned year to date that you're looking at additional 125 additional planned sales. If you could just walk through a little bit how you see, you know, maybe some of the -- on the drill-out I guess two things, on the liquidity, on what you're going to be spending maybe for the remainder of the year when you consist of the wells that Jim and Glenn talked about, and then your thoughts about that versus just the liquidity you have now on these asset sales.

Gary Evans

Well we’re sitting today with 135 million liquidity and that’s before the sale which is scheduled for next week of sale of the properties in the Tableland field which is 68 net to us, we have another one that under LOI, it’s just under 30 million which should close in June and we actually had a board meeting yesterday and talked about some other sales that I really don’t want to mention yet, so the beauty of having sufficient liquidity which the banks have really stepped up and helped us with our borrowing base and it gives us the time to be sure that we negotiate the highest value. I mean some of these property sales like over in West Virginia and Kentucky we’ve been working on for a year. The Tableland field we’ve been working on since October so it gives us the time to negotiate properly and get the highest value and not be -- have a gun to our head that we got to get our sale done because we need liquidity so, we feel pretty good about where we are right now in the transactions that are coming down the pike. We obviously control our CapEx but we haven’t needed to ratchet back, we’re sufficient to fund the game plan of $400 million capital budget this year and with the combination of -- we have another borrowing base review June 30 as well, we’re expecting a pretty big bump with our reserves, so I think all is fine there. Yes we’re not, I think flush with $500 million of cash but we were able to manage it.

Neal Dingmann - SunTrust Robinson Humphrey

Okay, and then lastly, just on acreage or lease hold, you know, additions, again, are you just looking in the Utica area. And then second, I forget, how is that progressing on that deal you have to, that lease package that you and Jim had worked on around what is that, Monroe County and such?

Gary Evans

We did buy additional leases in the first order, we have others we are closing on actually over the next 10 days, so we’re continuing to make the key structures not only in the Utica but also the Marcellus. We have a bigger package that we’ve been working on since last year that is been held up in some litigation between the two brokers, so that’s kind of stalled until it gets resolved, which we’re still contracted with it and both feel good that it will get resolved sometime over the next 59 days and continue to close on those transactions, so we are actively leasing and we’ve chosen not to say a whole lot more about what we’re doing because we continue to see our competitors sniffing around and watching everything we do, so we decided to be little more quiet about our leasing activities.

Neal Dingmann - SunTrust Robinson Humphrey

Very good. Thank you.

Operator

Your next question comes from the line of Leo Mariani with RBC, please go ahead.

Leo Mariani - RBC Capital Markets

Hi guys, wanted to delve into a couple things. In terms of CapEx, looked like your E&P CapEx was relatively low here in the first quarter. Can you give us a better sense of how we should expect the progression as we get into 2Q and 3Q on the CapEx?

Gary Evans

Jim you want to comment on that?

Jim Denny

Well I think you know, we’ll ramp up as we get into, we’ve got a number of wells, five to date that are yet, we’re waiting on fracture stimulations, so that’s about 50% of your well cost right there, and if we pick up a third rig, we’re on that lease too, in my area I think, even to maybe even accelerating into my budget very nicely, so especially when you consider that the 400 million included leasing which is not an inexpensive endeavor here in Appalachia anymore, so, I think my projections were right on, so I’m not sure I haven’t tried to evaluate the numbers and try to multiply my days a quarter but I’m pretty comfortable that we’re right on and not because we’re over budget just because our activity is as planned and should accelerate into the year.

Leo Mariani - RBC Capital Markets

Oh and I guess just a follow up related to that, you mentioned this third rig showing up to drill Marcellus wells. Can you give us a better handle on the timing on that?

Jim Denny

Yes, I was just looking at that, I prefer not to put the veto here but it’s like the third week of June.

Leo Mariani - RBC Capital Markets

Got you.

Jim Denny

And the soft date there is the permit this is a permitting, additional permitting of an existing pad, the permits are in and we’re expected to be about half of the normal 90 days process and it kind of confirmed that through West Virginia DNR so we’re, that’s what that data’s based on.

Leo Mariani - RBC Capital Markets

Okay, and a question on the revolver as well. Obviously, the bank borrowing base just went up. It was good to see. Just wanted to get a sense, I guess the Tableland closes next week. Is that revolver borrowing base, is that going to be changed or anything like that post the Tableland close, is that right?

Gary Evans

No it will, the borrowing of the 70 approximately be in, we’ll have to pay back the bank I think about 30 through pickup, we pick up 40 million liquidity there,

Leo Mariani - RBC Capital Markets

Okay. And additionally, you guys I think have talked about some potential payments that are still maybe due to Penn Virginia. Can you give us any update on what's going on there?

Gary Evans

No, there was an arbitration hearing and arbitrator continues to request additional data so that’s probably at least a couple of months away, we don’t know.

Leo Mariani - RBC Capital Markets

Okay. All right. Could you speak a little bit to infrastructure on the West Virginia side? I know you guys are continuing to build out Eureka Hunter, but obviously you've got some wells that are drilling there now. Any update on when the West Virginia wells may potentially go on line?

Gary Evans

Well, the infrastructure is pretty much there in West Virginia. There’s a lot of wells being fracked by Stone, which we have a 50% interest; there will be coming on here over the next few weeks. The Stewart Winland pad, there's just a small leg [Indiscernible] out here maybe about four miles that Eureka is going to be laying, is that right.

Jim Denny

Yes. About miles it should -- we’re midsummer for that pipeline to be completed and there’s plenty of capacity there.

Leo Mariani - RBC Capital Markets

Okay. That's helpful. I guess, you mentioned this one lease package from 2013 in the Utica that could be in litigation. Could you give us a little bit more color around that?

Gary Evans

You're talking about the MMW. Basically, I’ve already given the color the two brokers that were involved during litigation so there’s a collateral title until that resolve. So it’s all to be known, there’s no cost recurring. We’re still contractually up ready to buy their contractually upgraded the sale but there is a fight between two parties that we’re not really a part of.

Leo Mariani - RBC Capital Markets

Okay. How many acres is involved there?

Gary Evans

It was originally 32,000 Jim correct me how much have we closed on?

Jim Denny

We’ve closed on about 8000 acres I think, 9000 yes.

Gary Evans

Low 20s [Indiscernible].

Leo Mariani - RBC Capital Markets

Okay. Thanks guys.

Operator

Your next question comes from the line of Gabriele Sorbara with Topeka Capital Markets. Your line is open.

Gabriele Sorbara - Topeka Capital Markets

Thank you, good morning guys. Most of my questions have been answered, but maybe you can help me frame up 2015. You have some potentially high profile wells coming online before year end, especially with the Monroe County stuff, just wanted to see if you can talk about may be CapEx and growth levels? And then in that third rig you guys are adding in the Marcellus, does that stick around? Is the plan to run three rigs in the Marcellus Utica in 2015?

Gary Evans

Yes. I don’t see, I see this is keeping that third rig in probably 15 going to 4. So yes, we -- you’re going to see continued I mean if we can put on the kind of wells [Indiscernible] Stalder, as Jim mentioned he’s drilling additional wells, I mean I can’t express part of anybody enough how the magnitude of that I mean we’re talking about 25 million, 30 million a day wells so it has a big impact not only to in the upstream but to our midstream division as well. We believe The Stewart Winland is going to be a similar situation. We’re negotiating to drill some new wells back across the river in Monroe County and we hope to announce soon. So there is lots of, we will continue to slowly step out, approve of that Utica acreage as we go South, lots of people are watching The Stewart Winland well that will -- well approve up the significant portion of our West Virginia acreage and also to even some of our Southern Ohio acreage. So as we continue to have success you’ll see the budget go up, you will see the drilling go up and you will see obviously higher production so we feel really good about what plan has been and where we’re going and the results around continue to get better. So there’s nothing on our radar that indicates there’s any issues coming.

Gabriele Sorbara - Topeka Capital Markets

Thanks, Gary. And then just on the mineral acquisition you guys talked have about in the past in the Monroe County. What's the anticipated timing around that? And when does that four-well pad spud?

Gary Evans

That is, we’re hoping that that’s a late summer event.

Gabriele Sorbara - Topeka Capital Markets

Okay. And then on line by year end?

Gary Evans

That’s the plan.

Gabriele Sorbara - Topeka Capital Markets

Okay. Thank you guys.

Operator

Your next question comes from the line of Irene Haas with Wunderlich Securities. Please go ahead.

Irene Haas - Wunderlich Securities

Hi, good morning. My question is what is your current production today in the mix? And I also noticed that price realization was a little light for the oil this quarter, but natural gas liquids and gas did better. So I would like to have a little color on that. Then lastly -- have you heard anything about the Cabot well in West Virginia?

Gary Evans

I’ll answer the last phase and I’ll let Joe and Chris respond to your other two questions. So let's talk a little bit about who all has staked or completed wells in the Utica areas, because -- it is pretty important Irene. Chevron announced a significant well in Marshall County which is that’s the leg goes up, into Pennsylvania on the eastern border. That was over a 30 million a day Utica well. So we obviously announced the Stalder. There's been GST Gastar has staked a well in Wetzel County, and is drilling I think that well today. Antero has now staked a well in Tyler County near as to Winland well, I don’t know whether that’s drilling here or not. And then we have down in Wood County the Cabot well that you’ve mentioning. I know that he have permitted it, they have not moved a rig yet, and Cabot’s been very quiet about that, so we don’t know what their plans are, hopefully they drill us this year because it’s a huge validation point for us. With respect to your other questions on utilizations, Chris and Joe.

Joe Daches

Hi, Irene. This is Joe. The quarter-over-quarter average prices that we realized were $0.82 to $0.89 for 2014 and oil compare to $0.86, spot $0.79 for 2013. That can be the other commodity prices if you like as well, natural gas it was [Indiscernible] compare 5143.

Gary Evans

41.

Joe Daches

41, pardon me 4143. Thank you.

Irene Haas - Wunderlich Securities

Should we expect a similar differential for the rest of the year?

Gary Evans

I would hope, gas for sure.

Jim Denny

Yeah. We expect so.

Irene Haas - Wunderlich Securities

Okay. And then your current production like today and what is the mix?

Joe Daches

I think it’s a liquid is about 46% I think I have provide that a little bit earlier. And the current production on a BOR per day is 14796.

Irene Haas - Wunderlich Securities

That's just first quarter.

Gary Evans

[Indiscernible]

Joe Daches

Gary you broke up a little bit. It was 14796 per day for the three months on 2014. And in 2013 it was 7322 BOE per day.

Irene Haas - Wunderlich Securities

Like today, like May, early May, what's your current production, like right now?

Joe Daches

I don’t have May, but I do have through the end of April of being about a 100,000 Mcf approximately and which is about 60,700 BOE per day.

Irene Haas - Wunderlich Securities

Okay. Thank you.

Gary Evans

Are you including, the quarter was 4796 but the adjusted production continued operational was 17241, so we’ll make sure we complain apples-to-apples.

Joe Daches

That’s correct. Operator?

Operator

Yes. Your next question comes from the line of Chad Mabry with MLV & Company. Your line is open.

Chad Mabry - MLV & Company

Thank you. Question for Glenn up in the Bakken. Just a point of clarification on the current production, 4,600 barrels a day, does that include the Tableland assets?

Glenn Dawson

It does.

Chad Mabry - MLV & Company

And how much is included in that?

Glenn Dawson

We’re going to sales about 650 barrels a day primarily oil.

Chad Mabry - MLV & Company

That's helpful. Thank you. And then just a little color on the $30 million, I think you said that's being negotiated for sale up there. Any color on that? I'm assuming that's not at Ambrose. And how much production might be associated with that?

Glenn Dawson

No I can’t give you that information at this time.

Gary Evans

We haven’t a definite agreement yet, so we’re not talking about that.

Chad Mabry - MLV & Company

Okay, got it. And just one follow-up on CapEx, if I could, I know you reaffirmed the $400 million budget this year. On Eureka, it looks like you're I guess, sort of, spending ahead of that $90 million budget. Should we expect that to come up? Or are you still expecting to kind of come in at that $90 million level for the year on Eureka?

Gary Evans

I think we’re still good with that.

Chad Mabry - MLV & Company

Okay. That's all for me. Thanks.

Operator

Your next question comes from the line of Steve Berman with Canaccord. Please go ahead.

Steve Berman - Canaccord

Good morning. Another couple of production clarification questions, in the past several quarters, your adjusted production included shut-in volumes, as this was just looked like continuing ops and discontinued ops. Is there anything over and above in the first quarter that was shut-in that could be additive to those numbers?

Gary Evans

If no question, we didn’t include any of the shut-in here in adjusted, for instance installed it well, our biggest well in the company, Jim what’s produced 45 days about 700 million cubic feet and we show it was shut-in obviously part of the quarter. So we installed this well in the pad of was never tried in we just tested it. So there is two well, you got the wells that are being currently fracked at the WVDNR wells you have to shut those engines then…

Jim Denny

Yeah. We had to ship before strong wells entered; the last four and those are in the pulse to drilling our plug right now as we speak. So all late of those will come on very shortly as I expect.

Steve Berman - Canaccord

And Jim, that 12,700 BOE a day you gave for current Appalachia production, does that have the 2,500 shut-in…?

Jim Denny

No it did not that was an actual number from last week Steve that did not have either of the wells or our pro-forma on the stone wells or any of that, that was actual estimate of the molecule that came out last week and talking about debt WVDNR I think what we mentioned in the press release but we were having trouble handling more of that because we went to a central facility that’s up to hill and we’re having vapor locking. So we were limited as to the flowback water. So we continue to test those wells and I’d like to point out everybody that, they were all 9 million to 9.7 million a day with condensated NGLs, so it would be well over 10 million a day and these were shorter lateral in our previous wells, so on a pro-lateral basis they actually look to be foremost out wells and I think they may have been some initial confusion about those well simply because we hadn’t tested them yet and I was still under weather, so my apologies to the group for kind of giving you a partial score when the final score was actually considerably different. So thanks for bringing up that area because I had forgot mention that in my dialogue.

Steve Berman - Canaccord

And then one more for Gary or Joe. In the past you’ve talked about possibly cleaning up some of the preferred stock on the balance sheet. What's your latest thinking there?

Gary Evans

That is obviously a goal but until another significant event occurs it’s not in the near future.

Operator

Your next question comes from the Dan McSpirit with BMO Capital Markets. Please go ahead.

Dan McSpirit - BMO Capital Markets

Thank you. Good morning. Could you speak to your confidence level on the Stewart Winland Utica test? What legacy vertical well control, if any, exists in those parts? And how much leasehold could be de-risked upon a successful completion? And also discuss the depth and pressure gradient on that well. Thank you.

Gary Evans

There is no subsurface control. You just take in rate of dip in and forecasting it. We think we have penetrated the top up of the Point Pleasant and in fact have found that Trenton limestone. So we’re drilling rat hole now. I don’t have the true vertical depth conversion but it’s going to be around 10.8 to 10.9. The pressure gradient we won’t know until we’ve actually get in to probably fracking and we’re de-fit which will do part of fracking simply because especially in the vertical pilot you can drill them so much under balance. We would expect to be much like the Stalder 0.82 maybe even little higher since we all little deeper. We’re about on strike with Chevron test.

So all looks well at this point, we’re seeing great gas shows. I hate going in things without a logger without something definitive to point you, but right now I am very encouraged but subsurface wise no I don’t have anything. We do intend to take some rotary course which should give us some idea as to the kitchen that the formation has been exposed to that’s my biggest concern is that we might be a little over cooked and looking at some nurse even though I have no data to support just there is going to be a point when as you get deeper into the basin when I would expect that to occur. I don’t think we’re there yet looking at structure maps and offset operations. But other than that, did I answer your question.

Dan McSpirit - BMO Capital Markets

You did. Thank you very much

Gary Evans

We’ll take our last call operator from Kim.

Operator

Okay, your final question comes from the line of Kim Pacanovsky with Imperial Capital. Your line is open.

Kim Pacanovsky - Imperial Capital

Thanks, Gary. Good morning, everyone. Gary, a big picture question in light of Gulfport’s announcement yesterday and these very high-rate wells in the Utica, how do you think about production management? How do you anticipate producing these wells?

Gary Evans

I have read about the Gulfport issues yesterday. I think I may have told you and a number of other analysts that I was very concerned about how in the world ever going to meet those production estimates they had hit. So I can’t really comment about overestimating that. We don’t have lot of the midstream issues that other companies have because we very much control our midstream subsidiary and we plan to continue to do that. So [Technical Difficulty] that was the area we didn’t control. We were dependent upon another third party to lay that line. They can perform in all kind of issues we probably said forget was due to ourselves.

So I can imagine how other operators in this area are frustrated with the midstream counterparties in trying to get highlight and trying to get wells tight in. Fortunately with Utica guys and Chris on Board, we don’t have that issue. We know exactly when they’ll be there and what the plan is and we’re obviously helping fund that plan. So I think we have little better handled on that than others and so that’s why we reconfirm out guidance this morning. We feel very good about where we’re headed.

Kim Pacanovsky - Imperial Capital

Okay, great. Terrific. Then one question on the numbers. Can you talk about, if we saw a nice drop in the DD&A expense on a unit basis and what we might expect, what we might use in our models for the rest of the year?

Gary Evans

Joe you want to comment there

Joe Daches

Let me took a hard look at that and get back to you Kim where the DD&A droppers specific to you know divesting in the assets in Eagle Ford last year, so let me dial that in and get to you.

Kim Pacanovsky - Imperial Capital

Okay, great thanks for taking my question.

Gary Evans

All right, thank you, operator.

Operator

There are no further questions; I’ll turn the call back to the presenters.

Gary Evans

I want to just thank everybody for dialing in today. We feel like we had a good quarter, we’re continuing our game plan of divestitures and the focus being on our higher growth areas, we had growth both in the Williston Basin and the Marcel to Utica and continue to have some throughout the year, we’ve obviously continued to hit records on the Eureka Hunter pipeline system. So all looks good, we got great commodity prices we’ve got 11 year low in storage so I feel very bullish on where the gas is and it’s going to stay and we have a great year, so we look forward to reporting our business as the months ensue and have a good day and good weekend, thank you.

Operator

This concludes today’s conference call, you may now disconnect.

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