Seventy-five percent of the $20 million increase will be directed to the Company's Gulf of Mexico drilling activities on lease blocks acquired from the Minerals Management Service over the last four years. Magnum Hunter and its industry partners have continued to increase their drilling efforts in the GOM this year in an effort to take full advantage of the continuing higher commodity price environment.
Magnum Hunter's 2004 capital budget will be funded entirely from the Company's record high levels of cash flows from operating activities for fiscal year 2004, based upon management's current estimate of production and commodity prices for the remainder of the year. It is the Company's plan to use available cash beyond what is required to fund the 2004 capital expenditure budget for further reductions to outstanding long-term indebtedness.
The revised 2004 capital expenditure budget will be broken down by operating region as follows:
2004 Capital Budget (Millions) Gulf of Mexico $125 Southeast New Mexico 37 West Texas 28 Mid-Continent 14 Gulf Coast (Onshore) 16 Total $220
The Company has budgeted to participate in the drilling of approximately 150 new wells during 2004, including 40 wells offshore in the shallow water GOM and 110 wells onshore, primarily in Southeastern New Mexico, West Texas and the Texas Panhandle. In the GOM, 31% of the anticipated capital expenditures will be spent on drilling, 30% on completion operations, and 39% on new leases and facilities. Of the planned 40 GOM wells 32 are deemed exploratory and 8 are developmental. Onshore, 108 of the 110 planned new wells for 2004 are deemed development.
Commenting on the increase in the 2004 capital expenditure budget, Mr. Richard R. Frazier, Executive Vice President and Chief Operating Officer of Magnum Hunter stated, "Commodity prices received during 2004 from our daily production mix has exceeded all previous estimates. Our net daily oil and gas production is currently in the 250 Mmcfe per day range. We continue to divest of non-strategic and high-operating cost properties which allow our net margins to continue to improve. We are on track to grow our net daily production by an annual rate of almost 10%. With the recently announced EnCana and Permian acquisitions, Magnum Hunter's total proved reserves are just over 1 Tcfe. Even though we have been drilling higher risk prospects, our management team has been able to continue to maintain a very high drilling success rate of 96% during 2004 with a total of 118 wells completed successfully, out of 123 wells drilled through August 31, 2004."
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