The 2003 capital budget, which excludes acquisitions, approximates 2002's record budget of $27.3 million, which included two acquisitions and related expenditures totaling over $9 million. Approximately 91 percent of the 2003 budget or, $24.9 million, is allocated for drilling and development, $1.9 million is targeted for seismic and lease acquisitions and the remaining $600,000 is for infrastructure improvements. Company engineers have proposed the record 93 gross wells for 2003, with all activity to occur on its core Maverick Basin acreage. The capital budget program does not include a provision for an initial Deep Jurassic well, as TXCO has a carried working interest in the well which is expected to spud before March 31, 2003. The coalbed methane play has also been excluded from the initial 2003 budget. Its ongoing dewatering will continue to be evaluated, with additional wells expected to be proposed at a later date.
The $24.9 million allocated to 2003 drilling and development is broken out in the program summary below:
TXCO estimates that $6.9 million will be spent on 25 Georgetown wells and is targeting $6 million to be spent on 17 Glen Rose shoal horizontal wells. Additionally, an estimated $2.6 million will be spent drilling 15 shallow Pena Creek infill locations. Finally, $1.5 million will be allocated toward a 10-well program in a shallow gas play, the Comanche Escondido.
On the Saxet-operated Comanche lease, TXCO has allocated $7.8 million for 13 development wells and 13 exploration wells. This part of TXCO's proposed program, which is mapped by 3-D seismic, is subject to its operating partner's approval. Final processing of new 3-D seismic data recently acquired over TXCO's Comanche lease and its adjoining Pena Creek prospect is essentially complete and should yield numerous additional drillable locations.
The 2003 capital budget allocations are subject to change based on actual drilling results, operational developments, unanticipated transaction opportunities, market conditions, commodity price fluctuations and other factors. The Company, which has not hedged its production, intends to fund its 2003 capital spending primarily through internally generated operating cash flows and secondarily through its existing bank credit facility.
James E. Sigmon, TXCO President and Chief Executive Officer, said: "We look to build on 2002's tremendous growth by entering 2003 with an aggressive mix of drilling activity, both developmental and exploratory. The Board's approval of a record drilling CAPEX reaffirms our belief in our many Maverick Basin opportunities. We often talk about the Maverick Basin being a multi-play, multi-pay basin. The proposed 93-well drilling program, targeting several zones, emphasizes that concept. We expect the 2003 capital budget to significantly contribute to our growth through the drill-bit next year and beyond."
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