NEW YORK -- Penn Virginia Corp.'s (NYSE: PVA) president and CEO H. Baird Whitehead delivered an upbeat story about the company’s Eagle Ford Shale program to a packed house at IPAA OGIS New York on April 7. The company has transitioned from gas to oil in just three years and is gaining momentum, the executive said.

PVA’s Eagle Ford acreage and inventory have ramped up since 2010, from 6,500 acres to 85,000 net acres today with 1,100 locations remaining. It is continuing to amass land, adding 5,300 more net acres since mid-February. By the end of 2014, the company expects to hold 100,000 net acres in the Eagle Ford.

The company is “all in” in the Eagle Ford, devoting 98% of its drilling and completion budget to the shale in 2014. Its total capex this year is projected at a midpoint of $607.5 million.

Its $148 million in outspend will be funded through noncore asset sales, the sale of its Eagle Ford oil gathering system, its Magnum Hunter closing settlement and its credit facility.

It has its eye out for the next new play. “We are looking at unconventional resource plays; we need new ones at inexpensive or moderate acreage costs,” Whitehead said. Bringing on a partner early in the process is an option. And, the company has a “Chalk idea,” he said, referring to the Austin Chalk.

Meanwhile, the Eagle Ford is its engine. Penn Virginia's Midcontinent/Granite Wash assets are up for sale with closing expected soon, and its Mississippi Selma Chalk assets will be sold before year-end. “Improving financial liquidity enables us to execute,” Whitehead said.

Divesting these and other assets could raise $250 million to $300 million to help fund anticipated outspends.

Oil production growth overall this year will build, by 66%, to 78% in 2014, Whitehead said. Its other plays, largely gassy, are being allowed to decline. Its production in fourth-quarter 2013 was 13,000 barrels of oil equivalent per day (boe/d).

Plans are to drill 98 gross (53 net) wells this year on its acreage in Gonzales and Lavaca counties, with acceleration a possibility. It expects to average 20,000 barrels per day (bbl/d) in production through 2014 and reach 26,000 bbl/d in 2015 for a 30% increase on the back of a six-rig program. The goal is to self-fund an average annual $550 million drilling capital program in three years.

Average IP rates are improving, at 1,700 bbl, while 30-day rates have reached an average 1,200 bbl/d.

One of the company’s focuses this year is to determine whether the upper and lower Eagle Ford formations are separate resources. It they are separate, the upper Eagle Ford/Marl would offer exploitation upside. “By the end of the year, we expect to have it figured out,” Whitehead said.

Cutting Costs

Like its fellow Eagle Ford operators, it is paring drilling and completion costs by using pad drilling and zipper fracs. It is also pumping more sand. In 2013 it pumped 275,000 pounds per lateral foot; in the first-quarter of 2014 it pumped 325,000 pounds per square foot.

“We have found that higher frac intensity equals higher productivity,” Whitehead said.

The returns are attractive. At Peach Creek Field, PVA looks for an IRR of 41% at $80 WTI, and at a $100 WTI oil price it looks for a 74% return. This assumes 30 frac stages and about a 7,000 foot lateral. It also assumes a 418 million barrels of oil equivalent (Mboe) EUR-type curve with 85% oil, 9% NGL and 6% gas, and also assumes drilling and completion costs of some $8.1 million. At Shiner Field, the return is a little less: 38% at $80 oil and 64% at $100 oil.

PVA’s financial strategy is to maintain at least $150 million in financial liquidity and to lower the debt-to-adjusted EBITDAX to less than 2.5x, which it thinks is achievable by 2017 without additional sales. It aims to protect its cash flow with hedges, with 70% of 2014 and 43% of 2015 oil production hedged to protect a minimum $85 WTI price.

“People are starting to pay attention to where we are in size,” Whitehead said.

In late March, PVA hit a 52-week high of $16.91. On April 7 it was at $16.09. It is based in Radnor, Pa., and Houston.