Delta Dampens 2009 Spending, May Lower More Still
Tuesday, December 23, 2008
Delta Petroleum Corporation announced a reduction in its 2009 drilling capital expenditure budget to a current level of $85 million, which may be reduced further depending upon fluctuations in oil and natural gas prices. The revised budget has approximately 70% allocated to the Piceance Basin. The remaining 30% will be devoted to completion activities in the Paradox Basin, the Columbia River Basin, and the expectation of the drilling of one well in the Haynesville Shale. With operational control over its asset base and no significant drilling obligations, the Company maintains the flexibility to further reduce the drilling budget on short notice, if necessary.
This drilling capital expenditure guidance is a significant reduction from the initially provided 2009 drilling budget of $150-175 million. As previously announced, the Company has been aggressively reducing drilling activity in accordance with its plans to lower capital expenditures.
Roger Parker, Delta's Chairman and CEO commented, "The downward revision of our 2009 drilling capex budget was driven exclusively by the continued deterioration of commodity prices. We are confident that the reduced drilling budget allows us to operate in a financially responsible manner given current, and even lower, commodity price environments. It is important to note that estimated 2009 capital expenditures required to maintain 2008 production levels total approximately $40 million, and our 2009 obligatory drilling capital expenditures total only $10 million. We are fortunate that we do not have any long-term drilling contracts or lease term concerns on our operated properties."
As of November 1, 2008, the Company's funded debt was comprised of a senior credit facility, which had a balance of approximately $249 million outstanding on a $295 million borrowing base; senior notes of $150 million due in 2015; and $115 million in senior convertible notes due 2037. The Company's balance sheet reflects a $95 million term loan, which represents debt of the Company's partially-owned DHS Drilling subsidiary. This term loan is secured by DHS' rigs and is non-recourse to Delta. The Company also has $284 million of installment payable, due over three years. This liability is secured by $300 million of restricted cash that is classified on our balance sheet as a long-term restricted deposit.
The Company also reiterated its fourth quarter production estimate of 6.7 to 6.9 billion cubic feet equivalents (Bcfe).