Magnum Hunter Updates 2002 Capital Expenditures
Magnum Hunter Resources' Board of Directors approved an increase in the Company's existing capital expenditure plan for fiscal year 2002 of $10 million, from $115 million to $125 million. Approximately $5 million of the increase is associated with hurricane and tropical storm damage and repairs to offshore facilities that occurred in late September and early October. The Company also spent several million dollars on properties in preparation for their ultimate sale during 2002 for purposes of achieving maximum sales price value. Additionally, management of the Company also wanted to take full advantage of certain opportunities provided by reduced field service costs caused by lower than anticipated activity throughout the industry. The increase in capital spending has been funded from Magnum Hunter's discretionary cash flow and higher than anticipated proceeds received from non-core asset sales closed during the year.
For calendar 2003, Magnum Hunter's Board of Directors has approved a $100 million capital expenditure budget that has been front-end loaded with over one-third of the capital expenditures planned during the first quarter. This new budget is broken down by region as follows:
Gulf of Mexico $ 60 Million
Permian Basin 20 Million
Mid-Continent 15 Million
Gulf Coast (Onshore) 5 Million
Total $100 Million
The Company has budgeted to participate in the drilling of approximately 110 new wells during 2003, including 17 wells to be drilled offshore in the shallow waters of the Gulf of Mexico and 93 wells to be drilled onshore, primarily in Southeastern New Mexico, West Texas, and Western Oklahoma. In the Gulf of Mexico, 26% of the anticipated capital expenditures are to be spent on drilling, 27% on completion operations, and 47% on new leases and facilities. Of the planned 17 Gulf of Mexico wells, 12 are deemed exploratory and five are developmental. Onshore, 84 of the planned wells for 2003 are deemed developmental.
Commenting on the 2003 capital expenditure budget, Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "Management has completed an extensive review of projects in all regions in which we operate. We have high graded those properties that offer the highest rates of return on capital deployed within our existing portfolio. Management has intentionally front- end loaded the 2003 capital budget in an effort to take advantage of current commodity prices and low service costs. Over 50% of our 2003 capital budget will go to exploration projects that are both on land and offshore. The Company remains on target to exit 2002 with daily production in the 195 - 200 MMcfe per day range, after the impact of recent property divestitures. We have one remaining property divestiture planned for the first quarter of 2003, which includes most of the Company's Southern Louisiana onshore production. The Board of Directors of the Company intends to review the Company's capital budget plan again by mid-year and may revise the budget based upon results achieved year-to-date, commodity prices at that time, proceeds received from non-core asset sales, and field service costs. Magnum Hunter has continued to maintain a very high drilling success rate of 96% in 2002 with a total of 125 wells completed successfully out of 129 wells drilled through mid-December."