The Board of Directors of EXCO Resources, Inc. has approved a capital budget of $471.4 million for 2010. The budget is expected to be fully funded with cash flow from operations and is expected to provide significant increases in production and reserves. The capital budget, which is net of an estimated $205.1 million carry by BG Group for certain drilling and completion spending in our East Texas/North Louisiana joint venture area, is allocated among our different budget categories as follows:
(Dollars in millions)
Drilling and Completion: $ 217.4
Land: 78.2
Seismic: 32.3
Recompletion/Exploitation/Operations: 79.4
Midstream (Including $7.8 million equity contribution to TGGT): 39.1
Corporate and Other: 25.0
Total: $ 471.4
EXCO currently have 13 operated drilling rigs across our portfolio, and the company anticipate that this will increase to 17 during the first quarter and remain relatively flat throughout the remainder of 2010.
East Texas/North Louisiana Division:
The capital budget program in East Texas/North Louisiana includes plans to spend $255.2 million net to EXCO, or approximately 54% of the total EXCO capital budget. The company plan to drill and complete 115 gross (36.6 net) operated and 23 gross (1.3 net) non-operated wells in the division.
EXCO/BG Group Joint Venture (JV) - While EXCO plan to spend a total of $740.8 million within the JV, only $165.3 million of this amount will be spent by EXCO as BG Group will fund $205.1 million of EXCO’s portion of deep drilling and completion costs. The carry results in BG Group’s paying 75% of EXCO’s share of deep drilling and completion until BG Group’s $400 million carry commitment is satisfied. Of the $165.3 million that is net to EXCO, $78.9 million will be spent for drilling and completion costs, $50.0 million for lease acquisitions, $31.8 million for operations projects, and $4.6 million for seismic data acquisition. Since closing the joint venture in August, EXCO have acquired approximately 17,000 additional net acres. BG Group has the right to acquire half of these acres. EXCO continue to negotiate for the acquisition of more acreage.
EXCO are primarily drilling Haynesville shale targets, and thye company plan to have 14 operated drilling rigs within the JV area throughout the year. These rigs should allow them to drill and complete 108 gross (30.6 net) operated wells, 95 (26.4 net) of which are Haynesville shale targets, seven of which are Bossier shale targets, and six of which are planned Cotton Valley horizontals. Of their 14 operated drilling rigs, 13 will drill in EXCO's Holly area in DeSoto Parish and southern Caddo Parish, Louisiana, which the company believe to be an outstanding area within the Haynesville shale play. One rig will drill in EXCO's Jonesville/Waskom area which includes eastern Harrison County, Texas and western Caddo Parish, Louisiana. All of the company's 23 planned non-operated wells to be drilled are within the JV area.
Vernon Area - In the Vernon area, EXCO typically drill for deep Cotton Valley targets. The company plan to drill seven gross (6.0 net) wells and spend a total of $47.2 million drilling to test various zones for productivity. The overall budget within the Vernon area totals $89.9 million, with EXCO's non-drilling spending including $27.0 million for workovers and miscellaneous operations and midstream projects, $10.4 million for seismic data acquisition, and $5.3 million for land.
Appalachia Division:
The capital budget program for EXCO's Appalachia Division totals $154.2 million, of which $65.0 million will be spent to drill and complete 11 gross (11.0 net) operated horizontal Marcellus shale wells, four gross (0.6 net) non-operated Marcellus shale horizontal wells, six gross (6.0 net) vertical Marcellus shale wells, and six gross (6.0 net) shallow wells which are being drilled primarily to hold deep acreage. EXCO have identified five focus areas within the Marcellus shale play. The company expect to drill nine gross (9.0 net) operated horizontal wells during 2010 in central Pennsylvania, but also expect to drill vertical and horizontal wells within other areas of the play to test and hold acreage.
Other spending within the division includes $22.6 million for leasing land, $17.2 million for seismic data acquisition, and $28.6 million to expand the company's midstream system, all within the Marcellus shale areas. The remaining $20.8 million of the capital budget will support various operations initiatives.
Permian Division:
EXCO have a capital budget totaling $29.2 million for their Permian Division. Within this budget, $26.3 million will be spent to drill and complete 40 gross (38.7 net) operated wells, 36 gross (34.7 net) of which are in the company's Sugg Ranch Field. The target zones include Clearfork, Wolfcamp, Canyon and Fusselman formations, which EXCO believe contain higher oil bearing opportunities. The remaining four wells to be drilled will target zones within existing acreage blocks held within the Permian Basin.
TGGT Holdings, LLC (TGGT):
TGGT is the midstream joint venture owned equally by EXCO and BG Group in East Texas/North Louisiana. The TGGT capital budget will support installation of lateral lines, well flowlines, amine treating and dehydration equipment, among others. As TGGT is a stand-alone entity, the bulk of its $101.0 million ($50.5 million net to EXCO’s interest) capital budget will be provided by internal TGGT cash flow, but there is a forecast cash call of $7.8 million net to EXCO that is included within the EXCO capital budget.