Vintage Petroleum Reports Second Quarter Operational Results and Updates Plans for Second Half 2005
03 August 2005 - 9:30PM
Business Wire
Vintage Petroleum, Inc. (NYSE:VPI) announced today the results and
status of its second quarter operational activities and plans for
the second half of 2005. In the three months ending June 30, 2005,
the company made capital investments totaling $79.7 million, with
$60.8 million going to a variety of lower-risk exploitation
projects, $12.9 million spent on potentially higher-impact
exploration programs in the United States and Yemen and $6.0
million on domestic acquisitions. This brings total capital
expenditures for the first six months of 2005 to $144.0 million.
The 2005 non-acquisition capital budget has been raised 14 percent
to $285 million as a result of increased spending planned for
exploitation in the United States and Yemen, as well as domestic
unconventional resource exploration. 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 $30 million to a total of $70
million. Active drilling programs and workovers in the Luling,
Darst Creek and West Ranch fields in South Central Texas continue,
where nine wells were drilled and ten workovers were completed
during the second quarter. Work is currently underway to drill an
additional 18 wells and complete eight workovers. Another eight
workover projects are also under evaluation. Activity in the second
quarter of 2005 included the continuation of an infill drilling
program at the South Gilmer field of East Texas, where two wells
were successfully completed in the second quarter with another well
in progress. The expanded budget includes two Gilmer wells for the
second half, with another two under evaluation for possible
drilling in the future. At the company's Main Pass 116 complex in
the federal waters of the Gulf of Mexico, three workovers were
completed in the second quarter, and the company is evaluating
several additional drilling prospects in the field. At the end of
the second quarter of 2005, the company had returned to production
virtually all of the estimated 6,100 net BOE per day of production
which had been temporarily shut-in due to the mudslides experienced
in California during January. The company spent a total of
approximately $5.7 million through June 30, 2005, to repair
mudslide damage. Of this amount, approximately $2.2 million was
incurred during the second quarter. The company estimates an
additional $2.5 million will be needed in the third quarter to
finalize repairs to equipment and roads providing permanent access
to production facilities. 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 somewhat overall to $60 million from
$64 million with the allocation to unconventional resources raised
to $31 million, up 19 percent from $26 million. The capital budget
for U.S. conventional exploration has been reduced to $29 million
from $38 million principally due to delays in planned drilling
caused by the difficulty in obtaining drilling rigs on a timely
basis. The budget allocated to the unconventional gas resource
exploration program targets the drilling of 13 wells, pending rig
availability, to test five separate play concepts during 2005, an
increase over the prior allocation to drill ten wells to test four
play concepts. In one of these unconventional plays, located in the
Palo Duro Basin of Texas, the company has secured a substantial
lease position of approximately 145,000 net acres. Two exploratory
wells have been drilled and cored. The first well (Echols 2 #1) was
fracture stimulated in early July. Analysis of the core samples
from the second well drilled (Burleson 60 #1) is nearly complete
and frac design work is underway. Currently, the company plans to
fracture stimulate the Burleson well later in the third quarter.
Results of long-term production tests from the Echols and Burleson
wells will then 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,
approximately 128,000 net acres have been acquired in four
additional, separate unconventional play concepts located in other
areas of the country with the intention of accumulating additional
acreage and drilling wells later in the year to test each play
concept. The company is currently securing a rig that will allow
drilling operations to commence during September on the second play
concept to be tested (shale play "A"). Twenty-nine million dollars
has been allocated to conventional exploration activities primarily
targeting natural gas that can be brought to production quickly.
This reflects a $9 million reduction in planned conventional
exploration as Vintage has adjusted or deferred participation in
selected prospects for the remainder of 2005 principally due to the
tight rig market. Vintage anticipates drilling four exploration
wells to test prospects primarily located in the onshore and
offshore Texas Gulf Coast. Two Miocene prospects were drilled at
Matagorda Island 639 and 640 during the second half of 2004 with
both encountering apparent pay sands. Vintage holds a 25 percent
working interest in this offshore Texas gas prospect and expects
these wells to be brought online with the completion of production
facilities in August. Vintage recently acquired an additional lease
covering 720 acres in the Nueces Bay on the Texas Gulf Coast, where
the company holds a 53 percent working interest in a 1,000 acre
prospect that is targeting gas in underdeveloped Frio and Vicksburg
sands. The drilling of two wells on this prospect has been approved
for the fourth quarter. Other wells planned or underway include a
prospect in the Texas State waters of the Gulf of Mexico targeting
gas in the deep Marg Tex sands, and an exploration well updip to
existing productive sands near Lafayette, Louisiana. The company
owns 20 percent and 25 percent interests, respectively, in these
two prospects. The company also owns a 15 percent interest in a
prospect in West Cameron 145, located in the federal waters of
offshore Louisiana, that targets Miocene age formations at depths
of approximately 12,000 to 15,000 feet. This well is targeted to
spud in the fourth quarter of 2005 or early 2006. Argentina The
company's forecasted production growth in 2005 is supported by an
increase in Argentina capital spending of 23 percent over 2004
levels to $115 million, which targets the drilling of 110 wells.
Second quarter activity included the drilling of 27 wells, with 15
in progress, and the completion of 21 workovers. Currently there
are six drilling rigs and ten 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. Second quarter activity continued
to build on the company's substantial existing inventory of more
than 800 combined proved undeveloped and probable and possible
locations which provide significant future production visibility.
Based solely on drilling a majority of this inventory, Vintage's
Argentina production is projected to rise at a compound annual rate
of 10 percent over the next seven years, exclusive of acquisitions.
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 production 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. Only about one-half of the company's more than one
million acres in Argentina have been surveyed using 3-D seismic.
With Argentina currently accounting for approximately one-half of
company production, Argentina's projected growth provides strong
support for total company volume growth. Yemen The 18 mile (28 km)
permanent pipeline in Yemen was completed as planned at the end of
the second quarter, and it is currently transporting approximately
8,800 gross barrels of oil per day (4,600 net). Completion of the
central processing facility at An Nagyah is scheduled for the
fourth quarter, however, key portions of the facility are expected
to be fully operational by the end of the third quarter. Daily
production is expected to increase to 10,000 gross barrels of oil
(5,200 barrels net) by mid-third quarter. The company increased its
2005 exploitation budget by $7 million to accommodate additional
development drilling in the field. The An Nagyah #16 horizontal
well is currently drilling, and the company plans to drill the An
Nagyah #17 to test and develop a potential northwest extension of
the Lam reservoir immediately thereafter. The An Nagyah #18,
another horizontal well targeting the Lam formation, is planned to
follow in the fourth quarter. All of these wells, including the An
Nagyah #15 drilled earlier this year, are horizontal wells located
and designed to optimize recovery of oil from the An Nagyah field.
International Exploration Approximately $8 million has been
allocated to international exploration in 2005, with the majority
dedicated to the exploration program in the company's Block S-1 in
Yemen. An exploration well on the company's Wadi Markhah prospect
was drilled and partially tested during the second quarter. The
primary objective resulted in non-commercial shows, but a shallower
prospective zone remains to be tested. The well is suspended until
a workover rig can be secured for additional evaluation of this
shallow zone. Also in Yemen, the company installed two pumping
units and began a long-term test during the second quarter to
assess the economic feasibility for further development of the
shallow reservoirs at its Harmel discovery. Vintage to Webcast
Second-Quarter 2005 Conference Call The company's teleconference
call to review second quarter 2005 results will be broadcast live
on a listen-only basis over the internet on Thursday, August 4,
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
800-362-0574 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 August 9, 2005, by dialing 402-530-9315.
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, that address 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. Factors
that could cause actual results to differ materially from those in
forward-looking statements include 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. 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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