Magnum Hunter's Board of Directors has approved an initial capital budget for fiscal year 2010 of $25.0 million. The capex budget does not include any potential expenditures which may occur for possible merger and acquisition activities. The 2010 capex budget is predominately for capital expenditures necessary to fund the exploration and development activities associated with Magnum Hunter's acquisition of substantially all of the assets of Triad Energy Corp. ("Triad") and certain of its affiliated entities, scheduled to close next week. The Company plans to fund the approved fiscal year 2010 capex budget from internally generated sources of cash flows derived from a combination of operating activities and cash liquidity available under the Company's existing $150 million revolving commercial bank line of credit ($70 million borrowing base).
The Company has approximately $17.0 million of capex (approximately 70% of the total) directed to the Triad assets, including the horizontal drilling of a minimum of two unbooked Marcellus Shale locations in Tyler County, West Virginia. Additionally, Magnum Hunter has budgeted to immediately begin spending approximately $9.0 million of the capex on upgrading and completing the Eureka Pipeline system located in West Virginia being acquired with the Triad transaction. The balance of the Company's capex budget in Appalachia will be for new leasing activity and other oil and gas related projects.
For the Eagle Ford Shale located in Central and South Texas, Magnum Hunter has allocated approximately $7.0 million of capex (approximately 28% of the total). The Company plans to horizontally drill two unbooked Eagle Ford Shale locations during fiscal year 2010, with one of these to be completed before mid-year. Additionally, Magnum Hunter will be fracing this month an Eagle Ford Shale vertical well to test the fracturing and stimulation process for use going forward on the Company's extensive Eagle Ford Shale mineral lease acreage inventory. The balance of Magnum Hunter's capex budget in the Eagle Ford Shale will be for additional leasing related activities that are currently ongoing.
As the year progresses, it is probable that this initial $25.0 million capex budget will be increased by the Board of Directors based upon anticipated success in the Company's unconventional resource plays.
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