Year 2008 Potential Capital Resources, Uses and Liquidity
Capital Expenditures
Though we have completed several major property acquisitions in recent years, these transactions are opportunity driven. Thus, we do not "budget," nor can we reasonably predict, the timing or size of such possible acquisitions.
Our capital expenditures budget is based on an expected range of future oil, gas and NGL prices, as well as the expected costs of the capital additions. Should actual prices received differ materially from our price expectations for our future production, some projects may be accelerated or deferred and, consequently, may increase or decrease total 2008 capital expenditures. In addition, if the actual material or labor costs of the budgeted items vary significantly from the anticipated amounts, actual capital expenditures could vary materially from our estimates.
Given the limitations discussed above, the following table shows expected drilling, development and facilities expenditures by geographic area. Development capital includes development activity related to reserves classified as proved as of year-end 2007 and drilling activity in areas that do not offset currently productive units and for which there is not a certainty of continued production from a known productive formation. Exploration capital includes exploratory drilling to find and produce oil or gas in previously untested fault blocks or new reservoirs.
| U.S. Onshore |
U.S. Offshore |
Canada | International | Total | |||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||
| Development capital | $ | 2,870 | - | 3,020 | $ | 490 | - | 520 | $ | 1,070 | - | 1,120 | $ | 205 | - | 220 | $ | 4,635 | - | 4,880 | |||||||||||||||||||||||||
| Exploration capital | $ | 310 | - | 330 | $ | 320 | - | 340 | $ | 135 | - | 145 | $ | 185 | - | 205 | $ | 950 | - | 1,020 | |||||||||||||||||||||||||
| Total | $ | 3,180 | - | 3,350 | $ | 810 | - | 860 | $ | 1,205 | - | 1,265 | $ | 390 | - | 425 | $ | 5,585 | - | 5,900 | |||||||||||||||||||||||||
In addition to the above expenditures for drilling, development and facilities, we expect to spend between $325 million to $375 million on our marketing and midstream assets, which primarily include our oil pipelines, gas processing plants, and gas pipeline systems. We expect to capitalize between $335 million and $345 million of G&A expenses in accordance with the full cost method of accounting and to capitalize between $110 million and $120 million of interest. We also expect to pay between $70 million and $80 million for plugging and abandonment charges, and to spend between $130 million and $140 million for other non-oil and gas property fixed assets.
Other Cash Uses
Our management expects the policy of paying a quarterly common stock dividend to continue. With the current $0.14 per share quarterly dividend rate and 444 million shares of common stock outstanding as of December 31, 2007, dividends are expected to approximate $250 million. Also, we have $150 million of 6.49% cumulative preferred stock upon which we will pay $10 million of dividends in 2008.
Capital Resources and Liquidity
Our estimated 2008 cash uses, including our drilling and development activities, retirement of debt and repurchase of common stock, are expected to be funded primarily through a combination of existing cash and short-term investments, operating cash flow and proceeds from the sale of our assets in West Africa. Any remaining cash uses could be funded by increasing our borrowings under our commercial paper program or with borrowings from the available capacity under our credit facilities, which was approximately $1.3 billion at December 31, 2007. The amount of operating cash flow to be generated during 2008 is uncertain due to the factors affecting revenues and expenses as previously cited. However, we expect our combined capital resources to be more than adequate to fund our anticipated capital expenditures and other cash uses for 2008. If significant acquisitions or other unplanned capital requirements arise during the year, we could utilize our existing credit facilities and/or seek to establish and utilize other sources of financing.
Our $372 million of short-term investments as of December 31, 2007 consisted entirely of auction rate securities collateralized by student loans which are substantially guaranteed by the United States government. Subsequent to December 31, 2007, we have reduced our auction rate securities holdings to $153 million. However, beginning on February 8, 2008, we experienced difficulty selling additional securities due to the failure of the auction mechanism which provides liquidity to these securities. The securities for which auctions have failed will continue to accrue interest and be auctioned every 28 days until the auction succeeds, the issuer calls the securities or the securities mature. Accordingly, there may be no effective mechanism for selling these securities, and the securities we own may become long-term investments. At this time, we do not believe such securities are impaired or that the failure of the auction mechanism will have a material impact on our liquidity.