TXCO Resources' board of directors has approved a record capital expenditure budget and drilling program for 2008. It also provided an update on current activity.
The Company's initial CAPEX for next year has been set in a range of $100 million to $110 million, including 97 scheduled wells. TXCO expects to fund its capital program through proceeds from a recent private placement of preferred stock, internal cash flow and an existing bank credit facility. The budget may be revised, based on drilling plan changes by partners, rig availability, drilling results, operational developments, unanticipated transaction opportunities, market conditions or commodity price fluctuations.
The Glen Rose formation, including the Maverick Basin's prolific Porosity oil play (50-100 percent working interest) will continue to receive the largest share of the budget – $40.7 million for 35 wells, including 10 re-entries. In the East Texas Fort Trinidad Field, $12.5 million has been set aside for 10 wells targeting TXCO’s new Glen Rose B shoal gas play (50% WI).
In the Maverick Basin, $10.0 million has been allocated for TXCO’s 50 percent share of expenses for drilling and steam generation equipment in the San Miguel tar sand project. Also, the CAPEX has $7.0 million for two wells targeting the Pearsall shale gas resource play (100% WI) and $1.3 million for a Jurassic well (25% WI). Some $10.0 million will go to expansion of the Pena Creek San Miguel waterflood.
In the Midcontinent (10-22% WI), the initial CAPEX includes $7.4 million for four wells in Oklahoma's Anadarko Basin. In the West Texas Marfa Basin (50% WI), prospective for the Barnett and Woodford shales, the Company has allocated $1.5 million for exploration and development work.
"TXCO begins 2008 with more potential than ever to appreciably increase production and reserves," said CEO James E. Sigmon. "We will continue ramping up our CAPEX next year as we pursue the Company's multiple growth opportunities, including the San Miguel tar sand, Pearsall resource play and Fort Trinidad shoals – while waiting for Schlumberger's report before expanding our successful Glen Rose Porosity oil play. Coupled with our strong balance sheet, high oil price realizations and excellent cash flow, I believe 2008 will see an acceleration in our shareholder value growth."
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