At WBI Holdings, we are engaged in producing natural gas and oil and delivering that energy to the marketplace. Our vertically integrated businesses start with our natural gas and oil production operations. We also own gathering pipelines that accumulates produced natural gas from various field locations, and an interstate pipeline that takes gathered natural gas and delivers it to the marketplace. We also offer energy marketing and management services.
Our business plan focuses on the execution of a simple two-part growth strategy. First, we look to enhance the assets we already own; and, second we look to grow through the construction and acquisition of similar assets that complement our existing operations.
Natural Gas & Oil Production
At Fidelity Exploration & Production Company, we engage in activities that allow us to expand our natural gas and oil production and grow our reserves. In 2007, we produced 77 billion cubic feet equivalent of natural gas and oil, an overall increase of 4 percent from 2006. Reserves grew to 707 Bcfe and this is growth in both production and reserves is achieved through a combination of further development of producing properties and through the acquisition and exploration of new properties.
In early 2008, our oil and natural gas operations completed a major acquisition of producing properties in East Texas. In total, the acquisition brings in 97 billion cubic feet equivalent of proven reserves along with additional reserve potential in the area.
We have also been active in the Bakken play in North Dakota, which has been receiving a lot of industry attention lately. An April 2008 resource assessment by the U.S. Geological Survey shows a 25-fold increase in the amount of oil that can be recovered compared to the agency’s 1995 estimate of 151 million barrels of oil. The assessment showed an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in the Bakken Formation. The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest “continuous” oil accumulation ever assessed by the USGS.
We have an active drilling program in the Bakken play and initial results from our first wells are very encouraging. We are accelerating our drilling plans in this area and expect to participate in approximately 50 to 60 wells in 2008 of which approximately half will be operated wells. Our acreage position in the Bakken play includes approximately 75,000 net acres in Mountrail and Burke Counties of North Dakota.
Fidelity is actively engaged in several other exploration areas that hold promise. Early in 2007, we purchased a significant acreage position in the Paradox Basin located in southeast Utah and production from this exploration play started to flow last year. Our initial results are encouraging.
Continued development of the company's long-held Baker and Bowdoin Fields in Montana, and our coalbed natural gas operations in Montana and Wyoming, are key properties that have contributed to our past production and reserve growth.
Our total operated and non-operated oil and gas operations now span 10 states and the Gulf of Mexico. Our operated drilling locations are concentrated in North Dakota, Montana, Wyoming, Utah, Colorado and Texas.
Pipeline and Energy Services
At our pipeline operations, we continue to be committed to meeting our customer's needs for natural gas gathering, transportation and storage services. One of the ways we add value is by increasing the volumes of natural gas moved through our facilities. Demand for these services in the Rocky Mountain region is strong. We also seek ways to extend our facilities to attract new supply sources and to meet new delivery needs.
We achieved record delivery volumes in 2007 with total throughput reaching a record 233 million decatherms, a 7 percent increase over 2006 levels. A big project completed in 2007 was the expansion of our Grasslands Pipeline. We expanded firm capacity about 40 percent in 2007 by adding and modifying compression facilities. The Grasslands Pipeline is now capable of transporting 138 MMcf per day on a firm basis, which increases our total pipeline transportation capability to more than 650 MMcf per day. We also added several new connections to our 3,700 mile transmission pipeline to receive new natural gas from new supply sources.
Pipeline expansion projects planned for the future include a project in eastern North Dakota to meet new demand and a project to move new supply from the Bakken play to the Northern Border Pipeline. Both are expected to be operational by the end of the year. We are also looking into a proposed pipeline addition in north-central North Dakota to transport new volumes of produced natural gas from the Bakken formation to the Alliance Pipeline, which delivers to major metropolitan markets in the mid-continent region of the country.
Our gathering pipeline business has been equally busy. In 2007, about 50 miles of gathering pipeline and six associated compressor stations were added. The company extended its system to new producing areas and reduced field pressures for producers, yielding increased volumes of natural gas. We expect ongoing growth for our gathering pipeline business in 2008 as we work to keep pace with the strong increase in natural gas production in the areas where our gathering pipeline operates.
Our people
At our group of companies, we have hard working and highly skilled employees that are proud to bring energy to the marketplace. We all work together to maintain and enhance our collective commitment to safety and to being a great place to work. Our ability to be innovative and creative will enable us to continue our history of success.
Steven L. Bietz
President and Chief Executive Officer
WBI Holdings, Inc.
May 2008
