Houston-based Southwestern Energy Co., which focuses its oil and natural gas activities in the United States, on Thursday said it would spend up to $352.7 million, or 24% more, in 2005 for capital investments than it expects to spend this year. The budget includes up to $339 million for exploration and production (E&P) and $13.7 million to improve utility systems. Southwestern plans to drill 380 wells in 2005, up from an estimated 206 wells during 2004. Southwestern also plans to drill 35 exploration and exploitation wells in the onshore Texas Gulf Coast, the Permian Basin and in its other operating areas. Of the $339 million E&P capital budget, $271.2 million will be invested in development drilling, $10 million in exploratory drilling, $26.8 million for land and seismic, $24.0 million in capitalized interest and expenses, and $7 million in equipment, facilities and technology. Southwestern is targeting 2005 production at 61-63 Bcfe, an increase of 13-17% over the company's forecasted 2004 production. The 2005 targeted oil and gas production includes targeted natural gas production for the Fayetteville Shale play of 2.5-3.0 Bcf, "assuming positive operational results and full utilization of the allocated capital," the company said.
Kinder Morgan Inc. said it is expecting 12% earnings per share growth next year before including any potential benefits from acquisitions it plans to make. The company announced earnings expectations of $4.20/share in 2005 compared to 2004 consensus earnings estimates of $3.75. "It is important to note that although we are optimistic about our chances for making accretive acquisitions in 2005, we have not included any benefits from acquisitions in our base budgets," said CEO Richard Kinder. "We remain committed to transparency, and we will continue to review and explain any variances to the budgets during our quarterly earnings calls." KMI's expected cash flow in 2005 is $620 million. Affiliate Kinder Morgan Energy Partners LP expects to declare cash distributions of $3.13 per unit for 2005, which represents 9% growth over expected 2004 distributions of $2.87 per unit. The 2005 expectations include an excess of distributable cash flow over distributions even greater than the $28 million of excess budgeted in 2004.
Key Energy Services Inc. said it is selling the assets of its U.S. land drilling operations to Patterson-UTI Energy Inc. for $62 million in cash and will retain $10 million in working capital of the business, net of other liabilities. This business unit consists of 25 active rigs in the Permian Basin, San Juan Basin and Rocky Mountain regions. In addition, the company's land drilling business includes 10 stacked rigs as well as heavy haul transport vehicles and other related drilling equipment. The active rigs are mechanical with an average of 700 horsepower and depth ratings of 10,000 feet. The company will incur a loss on the sale but the amount of the loss cannot be determined until the company's restatement process is complete, Key Energy said. "Our objective is to focus on our core production services and thus, the company determined that its land drilling operations were not integral to this strategy," said Key Energy CEO Dick Alario . "Key has been in the land drilling business for many years; however, it now represents a small component of the overall company. "We anticipate closing the sale of this business within the next month and intend to use the proceeds for working capital purposes and to repay borrowings under our revolving credit facility."
Arena Resources Inc. agreed to buy gas producing properties located in West Texas for $10.55 million, comprised of $9.5 million cash and 150,000 restricted shares of the company's common stock, valued at $7 per share. Located in Andrews County, TX, the Fuhrman-Mascho prospect is the fifth acquisition by the company of a Permian Basin property located in this geographic area in the past 18 months. The property consists of 11,300 acres, 136 producing wells and net production of 230 Boe/d.
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