St. Mary Land & Exploration Company provides an update on the Company’s operational plan for the remainder of 2009 and its financial guidance.

Tony Best, CEO and President, remarked, “Through the first quarter of this year, we are on track in the execution of St. Mary’s 2009 business plan. Tests in our emerging resource plays are proceeding on schedule, our new credit facility was completed with increased commitments as expected, and we continue to have a drilling program with lots of flexibility due to our lack of long-term rig commitments. I am pleased with our progress to date, including our increased production outlook. We remain focused on adapting our 2009 program as necessary to accommodate these volatile market conditions.”

2009 CAPITAL INVESTMENT AND OPERATIONAL UPDATE

St. Mary reiterates its intention to invest within or near operating cash flow during 2009. Currently, the Company believes that the previously provided capital expenditure guidance of $341 million is essentially unchanged. The focus of activity continues to be on the testing of emerging resource plays in the Eagle Ford, Haynesville, and Marcellus shales.

St. Mary currently has five operated drilling rigs running throughout the Company. Three rigs are operating in the Mid-Continent region where two rigs are drilling deep Springer targets in the Anadarko Basin and one rig is drilling in the horizontal Woodford shale program. Recently, the Company successfully completed a four well simul-fracing pilot in the Woodford program, resulting in five horizontal wells producing in one section. The four recently completed wells are presently flowing back load water. Results from this pilot will be important in the determination of the optimum spacing for further development.

In the Maverick Basin in South Texas, the Company is presently drilling in the horizontal lateral of its first operated well targeting the Eagle Ford shale. The Eagle Ford section was cored prior to plugging back and kicking off the lateral and St. Mary intends to conduct a micro-seismic study during fracture stimulation of the well. Three additional horizontal Eagle Ford wells are currently planned for the remainder of 2009. The Company also intends to continue participating in the joint venture targeting the Pearsall and Eagle Ford shales with TXCO Resources and Anadarko Petroleum.

In the Haynesville shale program, the Company is currently drilling its second well targeting the Haynesville shale formation. The well is located in northern San Augustine County, Texas. After coring the James lime and Haynesville shale sections, this well will be drilled to the deeper Haynesville/Cotton Valley lime formation for evaluation purposes. St. Mary currently expects to complete the well as a vertical Haynesville shale test. One additional well targeting the Haynesville shale is planned for later in 2009.

St. Mary plans to start testing activities in the Marcellus shale in the third quarter of this year. Two horizontal wells are planned to be completed in 2009.

Since the last guidance update, the Company has seen significant decreases in the costs to drill and complete wells in some areas of operations as well as significantly lower natural gas prices. St. Mary continues to actively monitor the service cost environment and may reallocate remaining 2009 development capital to oil development activities.

Production – St. Mary currently expects that production will decrease sequentially in the remaining quarters of 2009 as a result of the Company’s decreased level of development drilling. Full year production guidance is being increased as a result of better than anticipated rate additions in the horizontal Woodford and deep Springer programs in the Mid-Continent region and strong production performance in the Permian region. The Company continues to believe that it is appropriate during this period of depressed commodity prices and declining costs to be investing in exploration activities while deferring most development investment.

The guidance above does not include any production volume impact from future acquisitions or divestitures.

Lease operating expense – The Company anticipates that in absolute dollars, LOE will be relatively flat for the remainder of the year. St. Mary continues to expect some softening in service costs in future quarters as a result of the slowdown in the exploration and production sector. However, aggressive pricing reductions have not been assumed in this guidance.

Tags: St. Mary Land & Exploration Company