CAPITAL EXPENDITURE BUDGET -- The Company announced that its board of directors has approved an increase in the 2006 capital expenditure budget to $220 million from the previously announced budget of $195 million. The increase in the budget reflects an increase in the number of wells expected to be drilled on acreage in the Cotton Valley Trend where the Company has a 100% working interest, an increase in the number of wells expected to have Travis Peak or Hosston sand completions in addition to the Cotton Valley completions, and adjustments for current drilling and completion cost estimates.
INCREASED BORROWING BASE -- The Company announced its borrowing base under its senior credit facility has been redetermined and increased from $75 million to $105 million. The amount currently outstanding under the senior facility is $44.5 million, which should allow the Company ample resources to fully execute this year's aggressive drilling plan.
10% INCREASE IN NET COTTON VALLEY ACREAGE -- The Company's gross acreage position in the Cotton Valley Trend has increased by approximately five percent to 135,000 acres and its net acreage position has increased by ten percent to approximately 88,000 acres. Based on this level of acreage, the Company feels confident it has a drilling inventory approaching 20 years at current activity levels.
DRILLING AND PRODUCTION UPDATE -- The Company has now drilled 110 wells in the Cotton Valley Trend with a 100% success rate, with 98 currently producing and 12 in the completion phase. The Company continues to operate eight rigs in the trend and expects to drill between 90 and 95 wells there in calendar year 2006. With drilling and completion operations continuing at this rapid pace, the Company expects company-wide sequential production growth in the second quarter to be approximately 20% or greater.
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