Jones Energy Inc. (JONE) said Sept. 9 it provided an operational update for its properties in the Anadarko and Arkoma basins of Texas and Oklahoma.

Highlights

  • Running three Cleveland rigs as of Sept. 3—reduced activity from five rigs running previously;
  • 2015 capex guidance reduced to $220 million from $240 million—previously increased production guidance maintained;
  • Third quarter production ahead of plan, led by natural gas outperformance;
  • Expect to run cash flow neutral program in second half of 2015; and
  • Leasing program underway—about 6,000 net acres acquired with more than half of $5 million budget remaining.

The reduction to three Cleveland rigs from the five rigs previously running is in response to the current market environment, said Jonny Jones, the company's founder, chairman and CEO.

The Austin, Texas-based company expects the reduction in activity to allow it to be cash flow neutral in the second half of 2015 while still achieving its previously increased production guidance.

Results from the company's 33-stage openhole wells continue to meet or beat expectations. Natural gas production exceeded the company's expectations.

Oil production continues to track the uplift expected from the incremental frack stages.

"We are beating our $2.6 million authority for expenditures (AFE), and see the potential for additional cost savings in a ‘lower for longer’ scenario," Jones said in a statement.

The company has already leased nearly 6,000 net acres with more than half of its $5 million budget remaining.

Jones said the company continues to have ample liquidity and are positioned to capture market opportunities.

"We remain substantially hedged and are one of only a few companies that has hedged a meaningful portion of its 2016 and 2017 production," he said.

The mark-to-market value of the company's hedges as of the end of August was more than $230 million.

"Our significant hedge book provides cash flow stability and continues to be an asset in the current environment," Jones said. "We have not yet determined what our 2016 capital spending program will look like, but we remain nimble from an operational perspective and have the ability to generate positive cash flow through 2016 by continuing to run three rigs.”