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Texas firm accelerates 2004 drilling program Large inventory, good prospects cause The Exploration Co. to expand program by 50%; using proceeds from $16M private placement Ray Tyson Petroleum News Houston Correspondent
The Exploration Co., a small but growing San Antonio, Texas-based independent with a strong acreage position in the prolific Maverick Basin of southwest Texas, is planning a hefty 50 percent plus increase in capital spending this year in order to accelerate development drilling on its 492,000-acre Maverick lease block.
To pay for the work, the company said it entered into purchase agreements with investors for the private placement of 4,266,669 shares of its common stock at a purchase price of $3.75 per share for gross proceeds of $16 million.
“Our limiting factor has been capital, not prospects,” James Sigmon, the company’s chief executive officer, said May 18.
The Exploration Co.’s “multi-play/multi-pay” strategy has led to the identity of “numerous attractive targets,” Sigmon said, adding that new financing will help the company accelerate development of one of its most promising plays, the gas-prone Glen Rose reefs.
“These reefs have been a consistent producer for years in the Maverick Basin,” he said.
He said analysis of 3-D seismic from a portion of the so-called Burr/Wipff prospect turned up as many as 15 reefs and that the company plans to commence drilling there immediately. Company’s reserves could double If only half of the reefs are eventually brought into production, the company’s technical staff estimates “we can expose the company to approximately 28 billion cubic feet of new gas reserves by year end,” Sigmon said.
The Exploration Co. reported year-end 2003 proved oil and gas reserves of 28.4 billion cubic feet of gas equivalent, a 21 percent increase from year-end 2002 reserves of 23.5 billion cubic feet of equivalent. Production in 2003 totaled 4.83 billion cubic feet of equivalent, up 11 from the previous year’s 4.37 billion cubic feet of equivalent.
The Exploration Co. said it expects to receive proceeds from the stock sale of $15.04 million, net of expenses, allowing the company to expand the drilling portion of its 2004 capital expenditure program by more than 50 percent.
The Exploration Co. plans to use $8 million of the proceeds to drill wells targeting Glen Rose reefs on the 80,000-acre Burr/Wipff prospect, which the company owns 100 percent. The company said the remaining $7 million would be used to increase drilling activity on its Comanche prospect, restore liquidity to its balance sheet and complement other operations, development and general corporate activities.
“Recent headlines in the exploration and production industry have reflected high valuations on firms with large, undeveloped acreage positions in proven oil and gas provinces,” Sigmon said.
“Accelerating our drilling and development activities will enable (the company) to leverage its growing prospect inventory, better reflecting the full potential of its Maverick Basin acreage.” Included in the stock deal are warrants for an additional 1,280,000 common shares exercisable at $4.25 per share.
Stock purchasers were private, U.S.-based investment funds, led by Crestview Capital Master LLC of Northbrook, Ill., The Exploration Co. said. First Albany Capital and C.K. Cooper & Co. served as placement agents for the transaction.
In the first quarter of 2004, The Exploration Co. generated $11.4 million in total revenues, up 25 percent from $9.1 million recorded in the first quarter of 2003.
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