El Paso to spend over $ 1 bn on exploration and production in 2009

El Paso Exploration & Production expects to spend between $ 0.9 bn and $ 1.3 bn in 2009 depending on market conditions. In order to maximize returns on capital, the allocation between drilling programs and the timing of spending will be reviewed on a continuous basis.
El Paso has already reduced the pace of capital activity in the first quarter of 2009 and will adjust it further based on changes to the company's commodity price outlook and the costs of materials and services.

The 2009 drilling program is typified by lower-risk, repeatable programs, with approximately 35 % of domestic spending in the Arklatex area, which includes the company's Haynesville Shale and Cotton Valley horizontal drilling programs. Internationally, El Paso expects to spend approximately $ 250 mm, with the largest portion devoted to the Camarupim (Bia) development project.
Production from Camarupim, which is operated by Petrobras, is expected to begin in the second quarter, reaching 50 to 60 mm cfpd, net to El Paso's interest, later in the year. At the current range of capital, the company expects to produce between 725 to 815 mm cf equivalent per day including its proportionate interest in Four Star Oil & Gas in 2009. Per-unit cash costs and DD&A rates are expected to be $ 2.05-$ 2.35 per mm cf and $ 2.30-$ 2.50 per mm cf, respectively.

"We are approaching 2009 with three primary points of focus -- to execute on our committed pipeline backlog; to create value from our E&P capital, while preserving our inventory of E&P opportunities, and to ensure adequate liquidity," said Doug Foshee, president and chief executive officer of El Paso.
"And while we are in a challenging environment, El Paso is advantaged in several respects. First, we have an excellent hedge position with a $ 9.00 per mm Btu floor on approximately 75 % of our expected 2009 domestic natural gas production. Second, due to our recent successful financings and asset sales, our current liquidity is roughly $ 3.3 bn, so we have more than adequate liquidity to carry us into 2010. And importantly, we have eliminated much of the construction risk associated with our pipeline projects."