Almost all of the increase will be directed to the Company's Gulf of Mexico drilling activities on lease blocks acquired from the Minerals Management Service over the last three years. Magnum Hunter and its industry partners have continued to increase their drilling efforts in the GOM this year in an effort to take full advantage of the higher commodity price environment along with historically low field service costs.
Magnum Hunter's 2003 capital expenditure budget will be funded from a combination of the Company's cash flow from operating activities for 2003, based upon management's current estimate of production and commodity prices for the remainder of the year, and proceeds derived from various non-strategic asset sales that have recently closed or are anticipated to close by year-end. It is the Company's plan to use available cash beyond what is required to fund the 2003 capital expenditure budget for further reductions to outstanding long-term indebtedness.
For calendar 2003, the $165 million capital expenditure budget has been front-end loaded with approximately 59% of total capital expenditures spent during the first half of the year. The revised 2003 capital expenditure budget will be broken down by operating region as follows (all amounts are in millions):
-Gulf of Mexico: $112
-Permian Basin: $36
-Gulf Coast (Onshore):$ 6
The Company has budgeted to participate in the drilling of approximately 144 new wells during 2003, including 38 wells offshore in the shallow waters of the GOM and 106 wells onshore, primarily in Southeastern New Mexico, West Texas, and the Texas Panhandle. In the GOM, 36% of the anticipated capital expenditures will be spent on drilling, 26% on completion operations, and 38% on new leases and facilities. Of the planned 38 GOM wells, 31 are deemed exploratory and 7 are developmental. Onshore, 101 of the 106 planned new wells for 2003 are deemed developmental.
Commenting on the increase in the 2003 capital expenditure budget, Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "Commodity prices received to-date during 2003 from our daily production mix has exceeded all previous estimates. Our net daily oil and gas production is currently over 205 MMcfe per day, after divestitures of non-strategic and higher operating cost properties. Also, we have three new high working interest wells coming on-line in the Gulf of Mexico over the next ten days which should materially impact our daily production. When combining our 2003 net available free cash with proceeds from 2003 asset sales, we feel very comfortable in increasing our capital budget in a manner that allows for continued debt reductions as well as supporting meaningful organic production growth from internally generated projects. We are on track to grow our net production by a 10% annual rate. Additionally, over 1 Tcf of risk adjusted Gulf of Mexico drilling prospects have been identified for future exploration activities through a recently completed third party study. Even though we have been drilling higher risk prospects, our management team has been able to continue to maintain a very high drilling success rate of 93% during 2003 with a total of 81 wells completed successfully, out of 87 wells drilled through August 31, 2003."
Most Popular Articles
From the Career Center
Jobs that may interest you