As the turmoil in the credit and financial markets deepens, several more oil and natural gas producers Wednesday reported that they are cutting their planned capital expenditures (capex) for the rest of the year and/or 2009 and are rolling back their drilling programs or postponing planned acquisitions in order to preserve capital liquidity. Producers said they also have taken steps to shore up their bank credit lines and cash liquidity.

The latest to trim capex budgets are Quicksilver Resources, Equitable Resources, Denbury Resources and ATP Oil & Gas Corp. They join the rapidly expanding roster of other producers, including Devon Energy Corp., PetroQuest Energy Inc.(see Daily GPI, Oct. 7), Chesapeake Energy Corp. (see Daily GPI, Sept. 24), Petrohawk Energy Corp. (see Daily GPI, Oct. 2), Penn Virginia Corp. (see Daily GPI, Oct. 6) and SandRidge Energy.

Fort Worth, TX-based Quicksilver Resources said it is cutting its capex spending for the fourth quarter by about $100 million and anticipates a slimmer capital program of $850 million in 2009, which includes an estimated $100 million of midstream spending to be funded equally by Quicksilver Resources and Quicksilver Gas Services LP.

“We are scaling back our capital investment program to a level that will approximate our projected cash flow,” said Quicksilver CEO Glenn Darden. “We expect to generate annual production growth of more than 25% in 2009, even at these reduced capital levels. With Quicksilver’s low-cost structure and its significant price protection through hedging, the company expects to generate cash margins of roughly $5/Mcfe of gas produced.”

Quicksilver said it is reducing the number of drilling rigs working in the Fort Worth Basin to nine from the current 14 during November, and expects to drill about 175 net wells in the basin next year. More than half the rigs will operate in Tarrant and Denton counties and the rest will operate in Hood, Somervell and Hill counties, the oil and natural gas producer noted.

The producer said average daily production volumes are now projected to be about 260-270 MMcfe/d this year and increase by more than 25% to 340-350 MMcfe/d in 2009. Due to shut-in production in the wake of hurricanes Gustav and Ike, third quarter production volumes are expected to average 270-280 MMcfe/d, down by about 10 MMcfe/d from what was previously anticipated. But Quicksilver Resources is more upbeat about the fourth quarter, expecting average production of 325-335 MMcfe/d — 20% more than in the third quarter.

Despite the twin hurricanes and the upheaval in the credit and financial markets, the company said it anticipates a 75% growth in production this year, excluding the effect of the divestiture of its Northeast operations in November 2007.

The company previously announced that its borrowing base was increased to $1.2 billion on its $1.45 billion credit facility. It said it had approximately $434 million of liquidity from the credit facility at the end of September.

Also caught in a liquidity crunch is Dallas-based Denbury Resources, which on Wednesday announced that it has canceled a planned $600 million acquisition. Denbury agreed to acquire the Conroe field, located north of Houston, in August from a privately owned company. Closing was expected early this month, and Denbury was to have financed the acquisition in part through an increase to its bank credit line, as well as by selling some Barnett Shale properties in North Texas.

“We wanted to address the potential liquidity concerns affecting all public companies at the moment,” Denbury CEO Gareth Roberts told energy analysts during a conference call Wednesday. “Firstly, we have an increased commitment from our banking group, and we currently have more than $100 million of cash on hand…Previously we announced the Conroe field acquisition, but we have decided not to pursue it at this time.”

Roberts explained that Denbury would forfeit a $30 million deposit on the Conroe field, but “with the credit markets collapsing, Denbury thought it was not prudent to spend $600 million on the field at this moment. We would still like to acquire it at some point in the future.”

Denbury, which finances its exploration program with cash on hand, also has reduced its budget for 2009. “We’re doing a ‘worst case scenario’ for 2009, but to be honest, there may be a lot of savings in our budgeted forecast,” Roberts said. In addition, “we have the option to increase [the 2009 budget] significantly if cash flow allows…We want to push some of our costs into 2010, when the capital expenditure requirements are expected to be significantly less.”

Denbury said it has set a preliminary base capital budget of $825 million for 2009 (excluding the purchase of the Conroe field), but it may augment it if commodity prices are favorable.

The producer said it has more than doubled its liquidity to $750 million via an amendment to its bank credit facility, and it maintains a borrowing base under the facility of $1 billion. Denbury noted that it has nothing drawn on the company’s bank credit line.

Pittsburgh-based Equitable Resources Inc. said Wednesday it plans to cut its capex spending from an estimated $1.4 billion this year to about $1 billion or less in 2009. Nevertheless the producer said it still expects to maintain sales growth of up to 20% a year in the long term. It reported it has achieved its year-end production target for the current year of 235 MMcfe/d.

Equitable Resources said its capital spending plan is built on the premise that it will not tap capital markets through 2010, the Associated Press said.

ATP Oil & Gas, a Gulf of Mexico and North Sea producer, said it intends to cut its capex budget by more than $200 million for the rest of the year and 2009. “Based on the current economic and financial climate, we believe it is prudent to reduce our remaining capital expenditures…We completed our most recent financing in June of this year, which provided us the strength and flexibility to withstand these volatile markets,” said ATP CEO T. Paul Bulmahn.

“ATP has completed its development plans at High Island A-589 and South Marsh Island 190, and both projects should be [in] production this quarter. Moreover, our development plans for Morgus and Mirage in the Gulf of Mexico and Wenlock in the North Sea are progressing on schedule, and those projects should add new production in 2009. Accordingly, we expect to grow production and cash flow in 2009. The reduction in capital expenditure budgets will impact production in the latter part of 2010 and beyond.”

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