Vintage Petroleum Reports Third Quarter Operational Results and Updates Plans for Remainder of 2005
03 November 2005 - 8:31AM
Business Wire
Vintage Petroleum, Inc. (NYSE:VPI) announced today the results and
status of its third quarter operational activities and plans for
the remainder of 2005. In the three months ending September 30,
2005, the company made capital investments totaling $142.9 million,
with $65.5 million going to a variety of lower-risk exploitation
projects, $16.3 million spent on potentially higher-impact
exploration programs in the United States and Yemen and $61.1
million on domestic acquisitions. This brings total capital
expenditures for the first nine months of 2005 to $286.9 million
including $70.1 million of acquisitions. The 2005 non-acquisition
capital budget of $285 million remains intact, however, the
remaining amount to be spent has been reallocated. An increase in
spending is planned for exploitation in the United States and
Argentina, raising the total for exploitation to $234 million from
the prior $217 million. A portion of the spending allocated to
domestic conventional and unconventional resource exploration has
been deferred, fostered by the protracted process of maturing
prospects and the difficulty obtaining drilling rigs on a timely
basis, effectively reducing exploration spending in 2005 to $51
million from $68 million. United States - Exploitation Based on the
company's success to date in domestic exploitation activities and
the opportunity to expand the drilling program in several fields,
Vintage has increased its 2005 domestic capital spending budget for
exploitation by $10 million to a total of $80 million. Active
drilling programs and workovers continue in the Luling, Darst Creek
and West Ranch fields in South Central Texas, where 10 wells were
drilled and 10 workovers were completed during the third quarter.
Work is currently underway to drill an additional nine wells and
complete 12 workovers, bringing total activity for the year to 34
wells drilled and 34 workovers completed. Activity in the third
quarter of 2005 included the continuation of an infill drilling
program in the South Gilmer field of East Texas, where two wells
and one workover were successfully completed. The expanded budget
provides for one workover and two additional wells to be drilled at
Gilmer during the fourth quarter raising total activity for the
year to 11 wells drilled and two completed workovers. Progress
continues towards returning to production, volumes that were
shut-in as a result of Hurricanes Katrina and Rita. The company
expects that all but approximately 1,100 barrels of oil equivalent
per day, or one and one-half percent of the net daily volume
produced in the second quarter, will be returned to production by
mid-November. United States - Exploration The focus of domestic
exploration activity is split between onshore unconventional gas
resource plays and conventional exploration targeting principally
the Gulf Coast. The capital budget for U.S. exploration has been
reduced to $41 million from $60 million principally due to delays
in planned drilling caused by the difficulty in obtaining drilling
rigs on a timely basis and the increasingly time consuming process
of maturing exploration prospects. In the unconventional gas
resource exploration program, long-term testing is underway on both
the Echols 2 #1 and Burleson 60 #1 wells in the Palo Duro Basin of
Texas, which the company drilled and fracture stimulated earlier in
the year. Results of these long-term production tests from the
Echols and Burleson wells will be analyzed before additional
drilling is undertaken in the Palo Duro Basin. Vintage owns working
interests in this venture which range between 65 and 75 percent. To
date, more than 360,000 net acres have been acquired in the five
separate unconventional play concepts located in the Palo Duro and
other areas of the country. The company has secured a rig that will
commence drilling operations mid-November on the second play
concept to be tested, a Devonian shale gas play. Currently, the
company has accumulated over 78,500 net acres in this play concept
and may seek to acquire additional acreage. Conventional
exploration activities primarily target natural gas that can be
brought to production quickly. Vintage is actively drilling or
maturing four exploration prospects to test play concepts primarily
located in the offshore Texas Gulf Coast. The Olivier #1 well,
currently drilling at a depth below 15,800 feet, is a deep gas test
in Louisiana, updip to existing productive sands. Similarly, the
company's Wesson prospect at Mustang Island Block 771-L is slated
to test the deep Marg tex sands and is targeted to spud in early
December. Two additional prospects are being readied to drill by
year-end 2005, one located on West Cameron 145 in the federal
waters of offshore Louisiana, which targets Miocene age formations
at depths of approximately 12,000 to 15,000 feet, as well as the
company's prospect targeting gas in underdeveloped Frio and
Vicksburg sands in Nueces Bay located in the state waters of Texas.
Argentina The company's forecasted production growth in 2005 is
supported by an increase in Argentina capital spending of 34
percent over 2004 levels to $125 million, which targets the
drilling of approximately 115 wells. Third quarter activity
included the drilling of 33 wells, with eight in progress, and the
completion of 25 workovers. Currently there are seven drilling rigs
and 10 workover rigs active on the company's concessions in the San
Jorge and Cuyo Basins. Further, a portion of 2005 capital spending
is budgeted for the implementation of four waterflood projects
which could enhance production in 2006. Procurement and
installation work was initiated on three of these projects in the
second quarter. Similarly, Vintage is initiating a gas
commercialization project in the Western concessions of the San
Jorge Basin. Plans call for a phased installation of a gas
gathering system with initial throughput beginning early 2006,
gradually increasing to 8 million cubic feet per day late in the
year. Acquisition of an additional 230 square miles of 3-D seismic
on the El Huemul, Las Heras and Sur Piedra Clavada concessions
located on the south flank of the San Jorge Basin will be initiated
during the fourth quarter of 2005. To date, only about one-half of
the company's more than one million acres in Argentina have been
surveyed using 3-D seismic. Third quarter activity continued to
build on the company's substantial existing inventory of more than
800 combined proved undeveloped, probable and possible drilling
locations which provide significant future production visibility.
Furthermore, given the company's production growth and high
drilling success rate, predicated upon its 3-D seismic surveys over
the past nine years, additional drilling locations are likely to be
generated as the existing inventory is drilled, existing 3-D
seismic is further evaluated and new 3-D seismic surveys are
conducted. With Argentina currently accounting for approximately
one-half of company production, Argentina's projected growth
provides strong support for total company volume growth. Yemen
Gross production in Yemen was 9,009 barrels of oil per day (4,685
net) in the third quarter, before the impact of changes in
inventories. With the addition of production initiated from the An
Nagyah #16 and An Nagyah #17 horizontal wells during the third
quarter, current production recently reached approximately 11,300
gross barrels of oil per day (5,900 net). Given the performance of
existing wells in the An Nagyah field, the contribution from wells
drilled in the third quarter and expected production from the An
Nagyah #18, the company anticipates that daily production could
exceed 12,000 gross barrels of oil (6,240 net) by year-end 2005.
Drilling on the An Nagyah #18, another horizontal development well
targeting the Lam formation, is underway. The An Nagyah #18 well
and the three horizontal wells drilled earlier this year, are
located and designed to optimize recovery of oil from the An Nagyah
field. After drilling the An Nagyah #18, the rig will move
approximately 14 miles (22 km) to the northwest to drill the Hatat
#1 prospect. This 6,560 foot (2,000 m) exploration well will test a
potentially fractured, granite basement high. Vintage to Webcast
Third-Quarter 2005 Conference Call The company's teleconference
call to review third quarter 2005 results will be broadcast live on
a listen-only basis over the Internet on Thursday, November 3,
2005, at 3 p.m. Central time. Interested parties may access the
webcast by visiting the Vintage Petroleum, Inc. website at
www.vintagepetroleum.com and selecting the microphone icon, or at
www.fulldisclosure.com and typing VPI in the ticker search box and
selecting "Go". The teleconference may be accessed by dialing
800/362-0571 and providing the call identifier "Vintage" to the
operator. The webcast and the accompanying slide presentation will
be available for replay at the company's website. An audio replay
will be available until November 11, 2005, by dialing 402/220-7223.
Forward-Looking Statements This release includes certain statements
that may be deemed to be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements in this release, other than statements of historical
facts, including future production, exploitation activities,
exploration, operating costs, capital spending, planned drilling
levels, proved undeveloped, probable and possible locations, and
events or developments that the company expects or believes are
forward-looking statements. Although Vintage believes the
expectations expressed in such forward-looking statements are based
on reasonable assumptions, such statements are not guarantees of
future performance and actual results or developments may differ
materially from those in the forward-looking statements in the
event that the proposed merger with Occidental Petroleum is
completed. Additional factors that could cause actual results to
differ materially from those in forward-looking statements include
the effects on the company in the event that the Occidental merger
is not completed, oil and gas prices, company realizations,
exploitation and exploration successes, actions taken and to be
taken by foreign governments as a result of political and economic
conditions or other factors, changes in foreign exchange rates and
inflation rates, continued availability of capital and financing,
and general economic, market or business conditions as well as
other risk factors described from time to time in the company's
filings with the SEC. The company assumes no obligation to update
publicly such forward-looking statements, whether as a result of
new information, future events or otherwise except as required by
law. Vintage Petroleum, Inc. is an independent energy company
engaged in the acquisition, exploitation and exploration of oil and
gas properties and the marketing of natural gas and crude oil.
Company headquarters are in Tulsa, Oklahoma, and its common shares
are traded on the New York Stock Exchange under the symbol VPI. For
additional information, visit the company website at
www.vintagepetroleum.com.
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