Focus on Higher Margin Projects
We intend to focus on higher margin natural gas, oil and natural gas liquids (NGLs) development projects in the Eagle Ford Shale, East Texas, the Marcellus Shale and the Mid-Continent. This strategy reflects the ongoing weakness in natural gas prices and the relative strength in oil and NGL prices. In 2011, we anticipate approximately 28% of our total production will consist of oil and NGLs as compared to approximately 18% in 2010.
Grow Primarily Through Unconventional and Resource Horizontal Drilling
We are applying horizontal drilling technology in the Eagle Ford Shale, East Texas, the Mid-Continent and the Marcellus Shale, which we believe will maximize reserve additions, production rates and rates of return. We allocate a majority of our oil and gas capital expenditures to development and exploratory drilling and related activities, most of which will be in these focus areas. We feel exploratory drilling provides operational balance and future development growth opportunities.
Pursue Selective Leasehold and Producing Property Acquisition Opportunities in Our Core Areas
Our experienced management team and technical professionals consistently look for opportunities to extend our leasehold acreage, especially in our focus areas. Adding acreage to our leasehold position increases the number of drilling prospects necessary to continue to grow our reserves and production. We allocate a smaller portion of our oil and gas capital expenditures to leasehold acquisitions.
Manage Risk Exposure Through an Active Hedging Program
We actively manage our exposure to commodity price fluctuations by hedging the commodity price risk for our expected production through the use of derivatives, typically costless collar and swap contracts. The level of our hedging activity and duration of the instruments employed depend upon our cash flows at risk, available hedge prices and our operating strategy.
Maintain a Strong Financial Position
We expect to continue to use our substantial cash flows from operations to fund the majority of our capital requirements, including working capital, supplemented as needed by debt financing, equity issuances and the sale of non-core assets while maintaining a conservative capital structure.