The Pioneer Natural Resources board of directors has approved a 2008 capital budget of $1 billion (which excludes acquisitions, asset retirement obligations, capitalized interest and geological and geophysical G&A), down significantly from comparable 2007 capital spending.
The decrease primarily relates to the completion of facilities construction for the South Coast Gas project off the coast of South Africa and the Oooguruk project on the North Slope of Alaska, the sale of all Canadian assets and the elimination of higher-risk exploration. Using current strip prices for oil and gas, Pioneer anticipates that its 2008 capital budget will approximate its cash flow from operations. Pioneer expects to increase average annual oil and gas production per share by at least 12% for 2008, pro forma for the divestiture of Canadian assets.
Approximately 90% of the capital budget will be focused on low-risk development drilling and resource play extension in Pioneer's four core onshore areas (Spraberry, Raton, Edwards Trend and Tunisia). The remaining 10% will be focused primarily on Oooguruk and Barnett Shale development drilling.
Approximately 60% of the 2008 budget is earmarked for oil drilling. This includes a 350-well program for the Spraberry field in West Texas, similar to the 2007 activity level. It also includes a 15 to 20 well program in Tunisia, where the Company plans to expand its 2007 drilling success in the Jenein Nord, Adam and Borj El Khadra blocks and commence a drilling campaign in the Anaguid block after completing a current 3-D seismic shoot. Lastly, with production facilities now complete, drilling has commenced in the Oooguruk field on the North Slope. A 15-well program is planned for 2008, consisting of disposal, injection and production wells, with first oil sales from Oooguruk expected mid-year.
The remaining 40% of the 2008 budget is focused on gas projects. In the Raton Basin in Southeast Colorado, Pioneer plans to drill approximately 175 gas wells. In the Edwards Trend in South Texas, the Company plans to build on the successful drilling campaigns of 2006 and 2007 by drilling an additional 35 to 40 wells in 2008. Multiple isolation packer frac technology will continue to be utilized to increase the average recoverable gas reserves per well. Other gas drilling is expected to include approximately 15 to 20 wells in the Barnett Shale, where Pioneer commenced building a core position during 2007.
Scott Sheffield, Pioneer's Chairman and CEO, stated, "Our 2008 capital program is expected to deliver double-digit growth from each of our four core onshore areas when compared to 2007. I am confident that this growth, coupled with the mid-year startup of Oooguruk production and the recent start-up of South Coast Gas production, will allow us to increase production per share by at least 12% in 2008. I am also confident that this capital program will deliver another year of attractive all-in finding and development costs in the range of $14 to $18 per barrel oil equivalent."
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