Magnum Hunter Resources Inc. on Tuesday boosted its 2003 capital expenditure plan by $15 million to $115 million, mostly to ramp up exploration work on new leases in the Gulf of Mexico (GOM). Of the increase, $14 million alone will be directed to offshore activities.

The increase in GOM activities followed Magnum Hunter’s success last spring in the Central Gulf Lease Sale 185, where it bid $9.5 million (net) on 38 Outer Continental Shelf blocks (see Daily GPI, March 20). The capital spending increase will be funded solely from Magnum Hunter’s discretionary cash flow, which the company said is up significantly because of the higher-than-expected commodity price environment.

“Commodity prices received to-date in 2003 from Magnum Hunter’s daily production mix have exceeded everyone’s expectations,” said CEO Gary C. Evans. “Now that we are halfway through the year and have a much better handle on our net daily oil and gas production, after property divestitures, and net available free cash flow, we feel very comfortable in increasing our capital budget in a manner that continues to allow for continued debt reductions.”

Evans added that Magnum Hunter had “maintained a very high drilling success rate of 90% in 2003 with a total of 52 wells completed successfully out of 57 wells drilled through May 31.”

For calendar 2003, the new $115 million budget has been front-end loaded with approximately 68% of total capital expenditures spent during the first half of the year. The revised budget will provide $74 million for the GOM; $22 million in the Permian Basin; $14 million in the Midcontinent; and $5 million for the Gulf Coast onshore.

Magnum Hunter budgeted funds to drill 116 new wells this year, including 25 wells offshore in the shallow waters of the GOM and 91 wells onshore, primarily in southeastern New Mexico, West Texas and the Texas Panhandle. In the GOM, 40% of the anticipated capital expenditures will be spent on drilling, 22% on completion operations, and 38% on new leases and facilities. Of the planned 25 GOM wells, 20 are considered exploratory and five are developmental. Onshore, 90 of the 91 planned new wells for 2003 are classified as developmental.

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