Jones Energy Inc. (NYSE: JONE) has provided its 2013 year-end reserves, an operations and risk management update, and 2014 guidance.

Highlights

  • Cleveland proved reserves increased 42% from year-end 2012 to 57.5 MMBoe; additions replaced production by 558% (307% through the drill-bit)
  • Total proved reserves increased 23% from year-end 2012 excluding the expiration of the Southridge JDA
  • Fourth quarter 2013 production increased to a record 1.7 MMBoe (approximately 18,200 Boe/d) despite impact of severe weather and other operations factors; full year 2013 production of 6.2 MMBoe (approximately 17,000 Boe/d) within previously announced guidance range
  • 2014 production guidance of 22,000 – 23,000 Boe/d resulting in over 30% production growth compared to 2013

2013 Year-End Proved Reserves and Wells Drilled

Jones Energy’s year-end 2013 estimated proved reserves increased 4% from year-end 2012 to 89.0 MMBoe, of which 56% were classified as proved developed reserves. Excluding the 15.5 MMBoe reduction in proved undeveloped reserves resulting from the expiration of the Southridge joint development agreement (JDA), proved reserves increased 23% from year-end 2012, and increased 42% in our core Cleveland area. Oil and NGLs (total liquids) increased to 56% of our proved reserve base. Additionally, proved developed reserves increased by 27% to 49.5 MMBoe.

Excluding non-operated wells, the Company spud a total of 86 gross wells in 2013 and completed 63 gross wells before year-end. As of December 31, 2013, the Company had 22 gross wells in various stages of completion and 10 gross wells drilling.

Jones Energy has completed 20 test wells in the Cleveland using a new completion technique, which has an average of 20 stages (3 clusters/stage resulting in approximately 70 foot spacing between clusters) compared to the prior design of 20 stages (210 foot spacing). The new technique uses a cased-hole design as compared to an open-hole completion in the prior design. The average cost per well of the new design is approximately $4.0 million, compared to $3.1 million using the historical design. All of the 20 wells in the first phase of the test program have been completed and are currently producing hydrocarbons.

Of the 14 wells with 30 or more days of production, 12 have produced at or above historical type curve. Over the next two quarters, the Company will monitor production data on the test wells and undertake additional optimization techniques, prior to making a decision on whether the level of production is significant enough to justify the incremental capital investment per well, and which design to utilize going forward. In the interim, Jones Energy will be employing its traditional open-hole completion technique in the Cleveland, which is the basis for its guidance for the balance of 2014. Going forward, the Company expects its average Cleveland AFE to remain at a best-in-class $3.1 million, which we expect will allow us to continue to generate compelling rates of return in our core play.

2014 Guidance

In order to generate growth above its base plan, Jones expects to begin a three well test in the Tonkawa formation in the second quarter of 2014. The company has also substantially increased its budget and expectations for leasehold acquisition within its core Panhandle operating area, which is prospective for the Cleveland, Tonkawa and other formations. In addition, it is also conducting frac optimization tests in the Woodford, involving more frac stages (16 – 20 vs. current 10 – 14 stages) with the objective of further improving overall economics in this play. The company is currently running 10 rigs in its core operating areas (eight rigs in the Cleveland and two in the Woodford), however, based on a success case for the Tonkawa drilling or Woodford frac tests, Jones expects to deploy two additional rigs in the second half of 2014.

Jones Energy is based in Austin, Texas.