Arena Resources Increases 2006 CAPEX Budget
Arena Resources has purchased a drilling rig which initially will be used exclusively as a second rig on the company's Fuhrman-Mascho leases in Andrews County, Texas. The rig is currently being refurbished and will be capable of drilling to a depth of 9,000 feet. Management initiated development work on the Fuhrman-Mascho in mid-April 2005 with one contract drilling rig, and projects it will drill and complete 35 development wells and re-frac 20 existing wells by year end 2005. The $1.5 million cost of the rig will be paid from current cash balances.
Prior to the purchase of the rig, management had announced an estimated 2006 capital expenditure budget of $35 million, which included the anticipated drilling of 90 development wells and more than 40 re-fracs and re-entries. With the addition of the second drilling rig, the company estimates it will drill approximately 130 development wells out of its inventory of more than 540 drilling locations, and perform more than 70 re-fracs and re-entries on an estimated 2006 capital expenditure budget of $55-$60 million, exclusive of any additional acquisitions; however, management will examine and refine the proposed budget more closely at year end. The company will finance the accelerated budget through current cash balances, anticipated cash flow from operations and, if necessary, by utilizing its currently unused $50 million bank credit facility.
Tim Rochford, president and CEO, stated, "The increase in the 2006
budget is directly related to the accelerated development schedule of
our Fuhrman-Mascho lease. Our new rig will be used only on our own
properties and allows us to plan ahead without the current
uncertainties of increased costs and rig availability. We anticipate
the rig to be in operation on our Fuhrman-Mascho lease no later than
the end of the first quarter 2006."
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