Mr. James Denny, President of Triad Hunter commented, "We continue to deliver excellent rates and economics with our "Magnum Rich" Marcellus wells located in West Virginia. With the addition of only 5.5 net new wells for the entire year of 2012, we have enjoyed greater than a 20% increase in year-over-year exit rate of production for the Appalachian region. This is outstanding given the hyperbolic nature of shale resource plays and supports our theory that this region reflects much shallower overall declines. We have recently drilled two new Marcellus wells located in Monroe County, Ohio which are waiting on fracture stimulation treatment. Further, we are very excited about drilling our first Utica vertical pilot, and horizontal well, starting in March 2013."
Pipeline expansion efforts at Eureka Hunter, the Company's midstream division, during the fourth quarter of 2012 included (i) successful bore under the Ohio River; (ii) tied the 20-inch high pressure pipeline into the MarkWest Mobley Gas Processing Plant; and (iii) construction of central production facilities at the Eureka Carbide site located in Wetzel County, West Virginia. At the end of the fourth quarter, Eureka Hunter had approximately 68 miles of pipe in service or ready for service.
The Ohio River bore has extended the 20-inch "Pursley Lateral" from Wetzel County, WV into Monroe County, Ohio near the town of Sardis. The Ohio River crossing will enable Eureka Hunter to further expand its footprint to include gathering of Utica and Marcellus production in Monroe and Washington Counties Ohio. The company is planning an extensive midstream expansion during 2013 for Utica and Marcellus gathering and processing in Ohio.
Gas processing service at Mobley and firm downstream pipeline capacity should allow Triad Hunter and other producers to increase production throughput on the Eureka Hunter pipeline system. Additional increases in production are anticipated during the first quarter of 2013.
TransTex Hunter, Eureka Hunter's treating and processing division, saw increased demand for gas treating units due to the slight stabilization of gas prices and the continued drilling in the liquids-rich resource plays, especially in the Eagle Ford Shale. TransTex Hunter has continued to see opportunities in the gas processing sector which is being driven by producers seeking to take advantage of processing uplift. Currently, TransTex Hunter is in the process of building smaller and medium size processing equipment which will allow the Company to take advantage of producers' requirements for processing while waiting for the larger cryogenic processing facilities to be built which require much greater lead times.
2013 Capital Budget
The Company's Board of Directors has approved a capital expenditure budget for fiscal year 2013 of $300 million for upstream activities. The 2013 budget will be evenly allocated to fund the exploration and development programs within the Company's three unconventional resource plays: (i) the Williston Basin -- Bakken/Three Forks Sanish/Madison; (ii) the Appalachian Basin -- liquids rich Marcellus/Utica/Huron/Weir; and, (iii) the Eagle Ford Shale oil play of Central and South Texas.
The Company believes the 2013 capex budget will allow for an estimated 2013 production exit rate of 23,000 Boepd - 25,000 Boepd. This represents an estimated growth rate of 24% - 35% in exit rates when comparing 2013 to 2012. These substantial growth rates are achievable due to the production rates being experienced in the Company's three unconventional resources plays. Magnum Hunter directly controls the operations on approximately 70% of the projects identified for fiscal year 2013. Therefore, the Company has the ability to adjust its capital spending program based on divestures, economics, commodity markets, capital markets or other prevailing conditions at any given time. The Eagle Ford, Williston and Appalachian Divisions have been allocated budgets of $100 Million each, consisting of $95 Million for drilling and completion cost and $5 Million for lease extensions.
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