Corridor Resources Inc. reported its capital and operating budget for 2008 as approved by its Board of Directors. The Corporation plans a total capital expenditure of $70.9 million, primarily related to drilling and completing additional natural gas production wells in its McCully Field in southern New Brunswick. The budget plan is designed to increase natural gas production and revenues from the McCully Field while limiting expenditures to the cash currently available and net cash flow expected from projected 2008 production rates and natural gas sales revenues.
Corridor's 2008 capital budget is designed to be affordable within the Corporation's projected fiscal capacity, including approximately $20 million of capital carried forward from Corridor's 2007 fiscal year plus approximately $50 million of expected net cash flow from McCully production during 2008. The base budget assumes that no additional funds will be utilized from other sources such as equity financings, increasing corporate debt or selling assets. The budget has been prepared based on several conservative assumptions regarding expected capital expenditures, production volumes and sales gas prices. Revenues from gas sales are based on a conservative average production forecast of 34 mmscf/day (25 mmscf/day net to Corridor), an average sales gas price of US$7.25/MMbtu at Henry Hub (NYMEX) and a US$ on par with Canadian $. The production forecast has been based on exponential decline curve projections. The US$7.25/MMbtu gas price is currently approximately $1.00 below the forward strip price for the remainder of 2008. Operating expenses are based on experience gained during the first six months of full field production.
The total 2008 base capital budget as set forth below is forecast to be $70.9 million net to Corridor's working interest. The budget projects that eight new McCully development wells and one exploration well will be drilled and cased by the end of September, 2008, at an estimated net cost to Corridor of $43 million (includes $5.5 M of net costs for well E-67 approved in 2007). Capital costs for drilling and completions do not reflect some of the cost reductions beginning to be achieved and apparent in drilling and well completion operations during recent months. The well completion budget is $18.8 million net to Corridor for fracturing and testing at McCully. Additional funds have been allocated to other activities, including $5.0 million for tying in new wells to the gathering system, $2.0 million for 3-D seismic over the east flank of the McCully structure and $2.1 million for gas plant maintenance and other corporate assets.
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