Vintage Pete (NYSE:VPI)
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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.