Capex Data
Encore Acquisition approved a capital budget for 2008 of $445 million related to its drilling and development program. This budget will allow the Company to meet its previously announced goal of an estimated organic growth rate of six to eight percent for 2008 (fourth quarter 2007 compared to fourth quarter 2008). In addition, the Board authorized the repurchase of up to $50 million of the Company's common stock. The shares may be repurchased from time to time in the open market or through privately negotiated transactions. The repurchase program is subject to business and market conditions, and may be suspended or discontinued at any time.
The Company has begun executing a hedge plan composed of swaps in the second half of 2008 and costless collars for all of 2008 at current market oil prices to gain confidence that both the budget and stock buyback can be accomplished within discretionary cash flow.
The Company's strategy for 2008 is to continue to focus on efficient production and reserve growth while maintaining investments within cash flow. The regional breakdown is expected to be as follows:
- Rockies $164 million
- West Texas $140 million
- Mid-Continent $102 million
- New Mexico $39 million
The $445 million of capital is expected to be invested in the following categories:
- Drilling $347 million
- Improved Oil Recovery, Workovers $67 million
- Land, Seismic and Other $31 million
Future Plans
The Company's strategy for 2008 is to continue to focus on efficient production and reserve growth while maintaining investments within cash flow.
The Company has four operating regions where it can use its expertise in improved oil recovery, horizontal drilling, and tight sands gas development to increase production and reserves. The budget leverages off the Company's 2007 development success with increased activity in all four regions. The activity in the Company's different plays is expected to be as follows:
- In the Rockies, the rig count will grow from one rig to three and one-half rigs in 2008 due to good results in the Bakken and Madison plays and drilling in the Cedar Creek Anticline. The Company will also focus on improved oil recovery projects at the Cedar Creek Anticline, the Bell Creek field, the Big Horn Basin and the Williston Basin properties purchased in April of 2007.
- In the fields covered by the ExxonMobil West Texas joint venture, the Company expects to operate three deep rigs targeting the Devonian in the Midland Basin and one deep rig targeting the Ellenburger, Strawn, and Devonian zones in the Val Verde Basin. One shallow rig will be drilling the Wolfcamp zone in the Val Verde Basin. This level of activity is similar to 2007 levels but will be lower risk as the Company moves from commitment wells to infield development wells.
- In the Mid-Continent, the Company expects to operate one rig in its Travis Peak play in East Texas. In addition, the Company will participate in a high level of non-operated activity in the Elm Grove field in North Louisiana and in the horizontal development of the Cleveland formation in the Anadarko Basin of Oklahoma.
- In their New Mexico region, the Company is increasing from one rig in 2007 to two rigs in its Morrow/Atoka play as a result of significant production growth.