Dune Energy: Ramping Up Louisiana Production
Wednesday, September 24, 2008
Dune Energy provides a post-Hurricane operation update. In preparation for Gustav's landfall, approximately 25 Mmcfe/day net was shut in. Many of Dune's onshore Louisiana fields were flooded and incurred minor structural damage. Total net shut in production for Hurricane Ike was approximately 30 Mmcfe/day. Post Ike damage was very similar to Gustav. Such damage is not anticipated to exceed Dune's deductibles for insurance claims. Currently, all but three fields are back on production and ramping up to pre-Gustav/Ike levels. The Leeville field in Lafourche Parish, Louisiana and South Florence field, in Vermillion Parish are not anticipated to resume full production until October 1, 2008. Live Oak field in Vermillion Parish, Louisiana is not anticipated to resume production until November 1, 2008. Deferred production is 3.5 Mmcfe/day net from Leeville and South Florence, and 1 Mmcfe/day net, from Live Oak. In total, Dune anticipates September production deferrals, associated with the two hurricanes, will be approximately 0.5 Bcfe. Third quarter net volumes are now estimated at between 29 and 31 Mmcfe/day. This includes production of approximately 4 Mmcfe/day through September 1, 2008 from discontinued operations in the Barnett Shale.
Drilling operations at Garden Island Bay were suspended as Gustav approached, and the rig moved off location. That rig was subsequently damaged and could not be returned to the location. A replacement rig has been secured and drilling on the SL 214 #912 has resumed. This well should be completed by the end of the month, at which time the rig will move to the SL 214 #908 ST#1, followed by the SL 214 #913 and #914. These four wells should be completed prior to year end and expose Dune to approximately 24 Bcfe net of new reserves and up to 14 Mmcfe/day of net production volumes. Drilling operations for the exploratory tests at Bayou Couba and Chocolate Bayou will probably not commence until the first quarter of 2009, primarily due to partner negotiations and rig availability. Workover and recompletions are currently being reactivated. Non-operated drilling activity has resumed at East Lake Sand and Leeville fields.
Dune anticipates greatly enhanced liquidity exiting the third quarter with between $28 and $30 million cash on the balance sheet, vendor payables at normal recurring levels and no cash borrowings from its $40 million revolver. Coupled with cash flow from continuing operations such enhanced liquidity will be more than sufficient to carry out the planned drilling program for the remainder of 2008. Dune's 2009 budget will be detailed later in the year. That budget will include participation in potential high impact exploratory wells at Chocolate Bayou, Bayou Couba, and Garden Island Bay. In addition, Dune will continue with exploitation of the numerous low risk/high rate of return Gulf Coast prospects.
James A. Watt, President and Chief Executive Officer stated, "We appreciate the efforts of our employees, contract employees and industry vendors in ensuring that our operations were evacuated safely and production restarted as soon as practical after the storms. Fortunately, considering the magnitude of the storms, total damage was relatively light and production deferrals not excessive."