2005 Capital Budget
Remington's Board of Directors has approved a capital budget of $145 million for 2005, representing a 39% increase over its initial 2004 budget of $104 million. Success on exploratory projects will likely increase 2005 capital spending to $200-$225 million. It is expected that this level of expenditures will be within the Company's available cash flow. Remington's approved budget includes planned exploratory wells and known developments. The budget does not include the costs associated with completions of new exploratory successes. The 2005 program assumes drilling 24 offshore exploratory wells and 4 onshore exploratory wells for a total investment of $79 million. Twelve of the 24 offshore exploratory wells are anticipated to drill to depths below 15,000 feet. Development capital of $41 million will allow for platform and pipeline installations on recent discoveries, along with development drilling on existing fields. Four to five rigs are anticipated to operate continuously during the year. The remaining $25 million will be used for seismic acquisitions, workovers, and lease acquisitions.
Listed in the table below are wells recently drilled, currently drilling or completing, along with wells that are scheduled to be drilled in the near term.
The Company's East Cameron Block 346 A-12 exploratory well was unsuccessful in the deep objectives and has been plugged back above 10,000 feet for completion in shallower objectives. We estimate a net dry hole cost of $ 2.7 MM will be expensed in the fourth quarter of 2004. Exploitation drilling for existing field pays in attic structural positions is currently in progress. These targets will be accessed using existing wellbores.
Remington operates East Cameron 346 and owns a 75% working interest. An unsuccessful exploratory well was drilled on Vermilion Block 187. This well was drilled to 13,670 feet and has been plugged and abandoned. We estimate a net dry hole cost for this well at $ 1.7 MM. Remington owns a 60% working interest in Vermilion Block 187.
Remington has made a new gas discovery at East Cameron Block 140. The #1 well was drilled to 7,423 feet and a single pay sand. This well has been completed and flow tested at a rate of 10.7 million cubic feet of gas per day. We are currently drilling an additional exploratory well to different geologic objectives. We expect this well to be evaluated by mid-February. Remington operates East Cameron Block 140 and owns a 60% working interest.
The Company has made a new oil and gas discovery at East Cameron 235 #1. This well has been drilled to 10,900 feet and has tested at a rate of 10.6 MMCFE and is awaiting platform and pipeline installation. First production is expected by the end of the first quarter 2005. Remington operates and owns a 60% working interest in East Cameron Block 235.
At the South Timbalier 138 #1, we have drilled to 20,200 feet and are currently testing potential pay intervals above 19,000 feet. Remington operates and owns a 50% working interest in South Timbalier 138 #1.
Additional wells to be drilled in the near term include two high risk, high potential, deep shelf exploratory wells located at West Cameron 147 #1 and South Pass Block 87 Aquarius Prospect. Both wells are expected to begin drilling in the first quarter.
Remington's fourth quarter 2004 production averaged approximately 113 million cubic feet of gas equivalents per day compared to an average 111 MMCFE/D for the third quarter 2004. The Company's annual production totaled 38.1 BCFE representing a 9.5 percent increase over 2003 volumes. The Company currently has four development projects scheduled to come online over the next four months.
The Company's goals for 2005 are to increase production volumes and reserves between 10% and 15% over 2004 levels. Remington anticipates publishing year-end 2004 reserves in late February. At that time guidance will be provided on 2005 production volumes, DD&A rates per Mcfe and cash costs per Mcfe.
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