Current net production attributable to the properties is estimated at 2,000 barrels of oil and natural gas liquids per day and 920 thousand cubic feet of gas per day from the Green River and Wasatch formations. Vintage believes the properties contain significant workover, drilling and waterflood potential which it plans to pursue along with the implementation of operational efficiencies. In addition to the property interests, Vintage is to acquire the majority interest and operational control of three gas plants which will provide Vintage with an increase in its natural gas gathering and processing income.
"These properties provide us with the type of operational and work program opportunities in which we have excelled historically. We are excited about operating in the Rockies and its potential to become a significant producing area for us," said S. Craig George, CEO.
Vintage currently has just over 2.1 million barrels of oil hedged during 2004 and nearly 1.4 million barrels of oil hedged during 2005 at average NYMEX reference prices of $29.00 and $25.73, respectively. "We're taking advantage of the strong oil price environment with hedges in place for 2004 and 2005, a portion of which helps to protect our projected acquisition returns," added S. Craig George, CEO.
As a result of this acquisition, Vintage is increasing its 2004 annual targets for cash flow from continuing operations from $214 million to $230 million and for EBITDAX from $315 million to $333 million. The 2004 annual production target has been increased by nearly one million barrels of oil equivalent (BOE) to 27.8 million BOE. The capital spending budget increase of $15 million will be allocated to exploitation spending in the United States, bringing the total capital spending budget for 2004 to $240 million. These revised targets and others along with the definitions of cash flow and EBITDAX are enumerated in the accompanying table, "Vintage Petroleum, Inc., Revised Targets for 2004" and are based on average NYMEX prices for 2004 of $27.00 per barrel of oil and $5.00 per MMBTU of natural gas.
The transaction is scheduled to close on or before December 2, 2003, subject to ordinary conditions precedent. Cash required at closing will be provided by the company's existing bank credit facility.
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