St. Mary Land & Exploration Company has announced its initial capital budget and production guidance for 2010.
Tony Best, CEO and President, remarked, "Our 2010 capital program reflects the expansion and improvement in our inventory over the past couple of years and gets us back on a track of growing production. We will be deploying a meaningful amount of investment in our emerging resource plays, particularly in the Eagle Ford and Haynesville shales, as we work to promote those potential resources to proved reserves. We will also be making significant investment in our oil and rich gas properties, which are generating very strong returns in the current commodity environment. We have the ability to comfortably fund next year’s program, and our strong financial position provides us the ability to accelerate activity with continued success. St. Mary continues to make progress toward our goal of being a leading North American resource play company."
The 2010 capital investment program is anticipated to be funded through cash flow from operations, anticipated proceeds from the previously announced divestiture of non-core oil properties in the Rocky Mountains, and, if necessary, the Company's existing credit facility. St. Mary's strong financial position also provides it the ability to expand its capital investment program through borrowings under the credit facility should the Company elect to accelerate drilling activity. As of December 16, 2010, approximately $437 million was available to borrow under that facility.
St. Mary will operate approximately 75% of the exploration and development capital it deploys in 2010. Details regarding significant programs are provided below.
Eagle Ford shale -- St. Mary plans to operate two drilling rigs continuously on its high working interest acreage in Webb, Dimmitt, and La Salle counties in south Texas in 2010. The Company has seen drilling efficiency gains in the Eagle Ford program, allowing it to increase planned activity without increasing rig count. The first operated well was drilled in 45 days, while its most recent well was drilled in under 14 days. The operated program will account for roughly 78% of the Company's investment in the Eagle Ford shale in 2010 and will consist of 34 gross operated wells, the majority in which St. Mary will have a 100% working interest. Efforts will be focused on de-risking untested portions of leasehold and developing parts of the program known to have richer natural gas and condensate.
In the joint venture with Anadarko Petroleum, the 2010 plan is to invest approximately $47 million to participate in wells located in the liquids-rich area of the play north of the Company's high working interest acreage. The budget for this non-operated portion of the Eagle Ford program could vary depending on the pace and scale of the operator’s program on the joint venture leasehold.
Approximately $24 million of the noted facilities budget will be deployed in the Eagle Ford shale program to expand infrastructure in the play.
Oil property development -- St. Mary plans to invest roughly $169 million, or approximately 30% of its exploration and development budget, on oil properties in the Permian and Williston basins.
In the Permian Basin, the Company will operate 89% of its capital investment, over half of which will be focused on Wolfberry tight oil projects. The 2010 program includes 32 wells at the operated Sweetie Peck asset and is designed to continue Wolfberry development on 80- and 40-acre spacing. It also includes six (6) 20-acre wells to test the viability of increased density drilling in portions of the play.
St. Mary's efforts in the Rocky Mountains will be focused primarily on targets in the Bakken and Three Forks formation in the Williston Basin. The Company plans to invest approximately $80 million in these programs, 67% of which will be operated by St. Mary. A total of 17 wells are planned in the Bakken and Three Forks program, including 11 wells in the Company's Bear Den prospect. A number of non-operated wells have also been included in the budget for this area. The initial results from St. Mary's Three Forks testing in Divide County will be evaluated in 2010 and capital has been budgeted to continue developing this acreage should results in the program be positive.
Haynesville shale -- The Company plans to drill six (6) horizontal wells and one (1) vertical well in 2010, all of which will be drilled in San Augustine and Shelby counties, Texas. The drilling program has been designed to utilize recently acquired 3D seismic data while preserving core leasehold. This operated portion of the program constitutes roughly 64% of the Haynesville program's capital investment in 2010. The majority of the remaining budget will support partner-operated drilling in east Texas and at Elm Grove Field in northern Louisiana.
Other Activity -- St. Mary plans to spend approximately $87 million in other exploration and development drilling activity in 2010, including operated activity in the Marcellus shale, the Granite Wash, and the Woodford shale. In the Marcellus shale in Pennsylvania, the Company plans to drill a total of four (4) wells -- two (2) in Potter County and two (2) in McKean County. Additionally, the gathering line connecting St. Mary’s initial test well will be turned to sales in the first quarter of 2010, with the trunk line to the second test well to be constructed immediately thereafter. In the Granite Wash program in western Oklahoma, the Company plans to drill four (4) operated wells in its Mayfield prospect and anticipates participating in a number of partner-operated wells across the play. The Company's first operated horizontal Granite Wash well in the Mayfield area, the Wester 2-34H (SM 38% WI), began drilling at the beginning of December 2009. In the Woodford Shale program, six (6) wells are budgeted to preserve expiring acreage.
The Company anticipates that pro forma production will bottom in the first quarter of 2010 and will grow on a sequential quarterly basis thereafter. Adjusting for divestiture activity, this translates to over 20% production growth from December 2009 to December 2010.
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