Vintage Petroleum Updates Plans for 2005

Vintage Petroleum (NYSE: VPI) announced the results and status of its first quarter operational activities and plans for 2005. In the first three months of 2005, the company made capital expenditures totaling $64.3 million, with $54.3 million going to a variety of lower-risk exploitation projects and $10 million spent on potentially higher-impact exploration programs in the United States and Yemen.

United States - Exploitation

For 2005, a capital budget of $40 million was allocated to U.S. exploitation activities encompassing 20 net exploitation wells to be drilled and approximately 45 well workovers, principally in California, Louisiana and Texas. Activity in the first quarter of 2005 included the continuation of an infill drilling program at the South Gilmer field of East Texas, where three wells were completed in the first quarter and four are currently targeted for completion by the end of June. Three wells are also planned in the field for the third quarter. Expanded drilling programs and workover activity in the Luling, Darst Creek and West Ranch fields in South Central Texas continue, where six wells were completed at the end of the first quarter with work underway to drill six additional wells. Two workovers are in progress with 16 more planned for 2005. In addition, eight new drilling locations have been approved with another ten to fifteen locations under evaluation.

In South Louisiana, two workovers have been completed at South Pass 24 with one in progress. At the company's Main Pass 116 complex in the federal waters in the Gulf of Mexico, the company has increased net daily production to 14.5 MMcf from 1.6 MMcf over the past year. Two workovers are also planned to further increase production and the company is evaluating four prospects in the field for 2005. First quarter results from all of the aforementioned efforts have brought over 1,800 net barrels of oil per day and over 7.2 net MMcf of gas per day on to production, making a substantial contribution toward the increased volumes supporting a revised production target for 2005.

At the end of the first quarter of 2005, the company had returned to production 4,500 net BOE per day of the total 6,100 net BOE per day of production which was temporarily shut-in due to the mudslides experienced in California during January. To date, a total of 5,500 net BOE per day has been brought back on-line, with the remaining 600 daily BOE expected to be returned to production by the end of June. The company currently estimates that it will complete the repair of mudslide damage for a total cost of approximately $7.5 million, nearly $1 million less than previous estimates. Of this amount, approximately $3.5 million was expensed in the first quarter.

United States - Exploration

Vintage began 2005 with an inventory of 13 domestic exploration prospects and a capital budget of $64 million. The focus of domestic exploration activity is split between conventional exploration targeting the Texas Gulf Coast and onshore unconventional gas resource plays. Twenty-six million dollars has been allocated to the unconventional gas resource exploration program to drill ten wells during 2005 to test a minimum of four play concepts identified during 2004.

In one of these unconventional plays, located in the Palo Duro Basin of Texas, the company has secured a substantial leased and optioned position in excess of 130,000 net acres. One exploratory well was drilled and cored in the first quarter, with a second well following early in the second quarter. Cores from these wells have been sent to a third party lab for analysis and testing that will aid in the formulation of the completion and stimulation program for these wells. Vintage owns working interests in this venture which range between 65 and 75 percent. To date, in excess of 70,000 net acres have been acquired in four other areas of the country with the intention of accumulating additional acreage and drilling test wells later in the year.

An additional $38 million has been allocated to conventional exploration activities primarily targeting natural gas that can be brought to production quickly. This endeavor anticipates drilling 11 exploration wells to test prospects primarily located in the onshore and offshore Texas Gulf Coast.

Two Miocene prospects were drilled at Matagorda Island 639 and 640 during the second half of 2004 with both encountering apparent pay sands. Vintage holds a 25 percent working interest in this offshore Texas gas prospect and expects these wells to be brought online with the installation of production facilities late in the third quarter. Vintage also controls a 53 percent working interest in acreage in the Nueces Bay on the Texas Gulf Coast, where 3-D seismic covering a 55 square mile area has been acquired and is currently being processed. In this play, Vintage is targeting gas in underdeveloped Frio and Vicksburg sands.


The company's forecasted production growth in 2005 is supported by an increase in Argentina capital spending of 21 percent to $113 million, which targets the drilling of 110 wells. First quarter activity included the drilling of 28 wells, with 13 in progress, and the completion of 25 workovers. Currently there are six drilling rigs and ten workover rigs active on the company's concessions in the San Jorge and Cuyo Basins. Further, a portion of 2005 capital spending is budgeted for the implementation of four waterflood projects which could enhance production in 2006. Two of these projects have been approved and implementation will begin in the second quarter.

The company recently drilled and completed three wells on the south flank of the San Jorge Basin with initial net production rates between 880 and 1,950 BOPD, ranking them in the top five percent of the more than 450 wells drilled by the company to date in Argentina. One of the wells was drilled on a new 3-D seismic survey acquired during 2004, thus reconfirming the continuing benefit of using this technology in the selection of drilling locations.


The recently completed An Nagyah #15 is one of three horizontal wells planned for this year in order to complete development of the field. Work began in late 2004 on the construction of a permanent pipeline and central processing facility that is slated to have initial gross daily capacity of 10,000 to 12,000 barrels of oil (5,200 to 6,250 net). The pipeline is scheduled for completion by the end of June and will begin transporting oil at that time, with the central processing facility scheduled for third quarter completion.

International Exploration

The company is continuing to pursue its exploration program in Block S-1 in Yemen. Approximately $8 million has been allocated to international exploration in 2005, with the majority dedicated to the effort in Yemen. The company drilled one exploration prospect in the Malaki area during the first quarter, but the well was non-productive and plugged. A new exploration well on the company's Wadi Markhah prospect, 31 miles (50 km) to the southeast of An Nagyah, is currently being drilled and should be completed during the second quarter. Also in Yemen, the company has installed two pumping units as part of a long-term test to assess the economic feasibility for further development of the reservoirs at our Harmel discovery.


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