Zodiac Exploration Earmarks $41.9MM for 2011 Capex

Zodiac Exploration announced that the capital and operating budget for fiscal 2011 has been approved by its Board of Directors. The Company plans a total capital expenditure program of $41.9 million which includes the drilling and completions of wells in its Jaguar prospect in the San Joaquin Valley (California, USA); associated facilities infrastructure; land acquisitions and additional geological & geophysical expenditures. The 2011 budget is subject to quarterly review and potential revision to account for the results of actual operations.

Priorities for 2011 include:

  • Drill & complete a 100% working interest vertical well to test the Vaqueros formation;
  • Drill & complete 3 gross (1.9 net) additional horizontal wells to prove horizontal hypothesis and achieve production (plus preparatory costs for well #5);
  • Facilities and Pipeline Infrastructure to support the above;
  • Acquisition and interpretation of G&G data in Zodiac's areas of focus; and
  • Continued expansion of Zodiac's land base through acquisitions.

2011 Capital Budget

The expected breakdown of the Company's budget is as follows: $31.2 million for drilling and completions work; $4.5 million for facilities and pipeline work; $3.4 million for land; and $2.8 million for seismic and geology. The Company expects that it will be able to improve on the per well drilling and completions costs once it proceeds from the evaluation stage to the development stage of the project's development.

Zodiac's 2011 capital budget has been designed to be self-sufficient within the Company's projected fiscal capacity, including working capital carried forward from the 2010 fiscal year ended September 30, 2010. The budget assumes that no additional funds will be utilized from other sources such as equity financing, corporate debt or asset sales. The budget has been prepared based on several assumptions regarding projected capital expenditures and pricing estimates extrapolated from current costs and historical events. Zodiac has the flexibility to expand, reduce or defer its capital program if available funds exceed or fall short of its projections in the 2011 budget. Decisions regarding which, if any, of these options are to be pursued will be dependent upon availability of capital and other information obtained as operations progress. Zodiac intends to monitor cash flow closely and adjust capital expenditures accordingly.