Rapidly rising cash flow from growing production and high commodity prices has led Houston-based Edge Petroleum Corp. to more than double its capital spending budget for the year. The company’s board of directors approved an increase in its 2003 capital spending budget to $35 million, compared to the original $15.3 million budgeted.

“We believe that our strong financial condition and growing cash flow have provided the foundation for a significant increase in our planned activity level and that this is an excellent time to take advantage of moderate service costs and strong commodity prices,” said CEO John Elias. “Our recently announced exploration joint venture in Southeast New Mexico adds significant potential, which we expect will begin to impact our production volumes and cash flow next year. I expect it will be a major contribution to our activity level in 2004.

“The increased activity as a result of our growing capital budget and the expected closing of our planned acquisitions is expected to impact our production volumes late in 2003,” he added.

The company said that $10.8 million of the spending will go to previously announced acquisitions and joint exploration ventures. The $9 million balance will go to an increase in the drilling budget.

Since the end of the second quarter, Edge has participated in the drilling of six wells, all successful, which brings the year to date total to 23 wells with a success rate of 87%.

Earlier in the week, Edge expanded its focus with an agreement to explore an area of southeastern New Mexico’s Permian Basin with partners Pure Energy Group and Chisos Ltd (see Daily GPI, Sept. 3). The area of mutual interest agreement covers all of Eddy and Lea counties, as well as a portion of southern Chaves County, where Pure and Chisos own 47,000 gross (27,000 net) acres.

“As previously reported, we continue to project 2003 quarter over quarter production growth in excess of 15%. The real impact of our expanded 2003 program will be felt in 2004 where we now expect a year over year production increase in excess of 20%, before the impact of what we hope to be a significant drilling program in 2004.”

Regarding the company’s hedging position for 2004, Elias said, “Looking forward into 2004 we expect to continue our capital spending and activity growth. Based upon our expectations for production and cash flow in 2004, management and the board of directors felt it would be prudent to initiate a hedging program for 2004.”

For 2004, Edge has hedges set in place for 10,000 MMBtu/d with a price floor quoted at the Houston Ship Channel of $4.50 and price caps of $6-7.

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