LOS ANGELES -- To paraphrase a contemporary of the 1870s denizens of "Deadwood," reports of the show's death have been somewhat exaggerated -- though maybe not greatly.

The third season of the HBO western, which begins Sunday, will still be its last full season on the air. But the network and series creator David Milch have reached an agreement to extend the show's life through a pair of two-hour movies that will end the show's run, the showbiz trade papers report.

"I am thrilled that we were able to figure out a way to continue," Milch says in a statement. "No one was ready to let go of the show, and I'm really glad we've found a way to proceed that works creatively."

Milch and HBO came to an impasse over a fourth season of "Deadwood" earlier this year, as a deadline to pick up contract options on the show's actors loomed and the network declined to take any action. Letting the options expire would free cast members to seek other jobs.

Money was also an issue. Episodes of "Deadwood" took as long as 16 days to shoot, about twice the length of most TV dramas, and cost as much as $5 million apiece, the trades report.

HBO offered to pick up an abbreviated fourth season of the show, but Milch declined. The two sides reportedly worked out the deal for the two movies over the weekend. The network must now rework its deals with the show's actors but appears confident that it will be able to bring the cast back.

The "Deadwood" negotiations don't seem to have soured Milch's relationship with HBO too much. He's working on a pilot for the network with author Kem Nunn called "John from Cincinnati," which is based on Nunn's work and is described as "surf noir."