CALGARY, ALBERTA -- (Marketwired) -- 04/08/13 -- Molopo Energy Limited (ASX: MPO) ("Molopo" or the "Company") today announces its 2013 capital expenditure budget and outlook. All dollar figures quoted herein are US dollars.
Following the appointment of Steve Cloutier as Managing Director and Chief Executive Officer in January, Molopo undertook a review of the execution of the Company's North American strategy. This process was implemented primarily to assess the optimal deployment of Molopo's remaining cash balances relative to the continued development of its Permian Basin lands in West Texas, where the Company holds an interest in approximately 26,000 net acres prospective in the Wolfcamp shale oil play. At March 31, 2013 the Company had approximately $64 million in cash, which reflects payment of the remaining costs related to the Company's 2012 drilling and completions program.
Although capital investment in the Wolfcamp during calendar year 2012 resulted in a significant production increase relative to prior year-end levels, higher costs and lower initial production rates did not match estimates. Accordingly, while Molopo continues to believe that the Wolfcamp offers significant potential value for its shareholders, its board of directors has approved a capital expenditure budget for 2013 and a go-forward plan that reduces drilling activity and focuses on cash preservation. Concurrently, the Company will be retaining a financial adviser to assist it in the identification of potential strategies for maximizing the value of its Wolfcamp land and production for the benefit of its shareholders (the "Wolfcamp Value Maximization Process").
Molopo's 2013 capital expenditures will be allocated predominantly to activities that preserve the Company's acreage and will be timed so that minimal capital will be spent while it moves forward with the Wolfcamp Value Maximization Process.
Highlights of the 2013 capital budget are as follows:
-- Up to $10.3 million allocated to lease-preservation initiatives in both Molopo's Barnhart and Fiesta areas. These include the potential drilling of a north-south well in Barnhart during the fourth quarter (estimated cost to drill, equip and tie-in of $5.0 million); and extensions on Fiesta leases scheduled to reach the end of their primary terms between April 2013 and January 2014, in an estimated aggregate amount of $5.3 million. As stated above, the Wolfcamp Value Maximization Process may result in some of these expenditures not being incurred by Molopo.-- Approximately $1.5 million allocated to the drilling of two water disposal wells (one each at Fiesta and Barnhart) during the third quarter. Since these wells help reduce operating costs, it is anticipated that these operations will be conducted regardless of the outcome of the Wolfcamp Value Maximization Process.-- Approximately $1.5 million to release the Wolfcamp drilling rig that Molopo had contracted in mid-2011 and into 2012, in contemplation of a more active capital program.-- Approximately $0.5 million to conduct pressure work on existing Wolfcamp wells during the second quarter which will provide additional data to assist with the on-going calibration of the drilling and completions program.