The properties, located in Andrews County, Texas, consist of approximately 720 acres, with net production of approximately 30 BOE per day from two formations, the Glorietta and San Andreas. The properties are contiguous to a portion of the company's Fuhrman-Mascho lease, which was acquired in December 2004. Arena will be the operator and have a 100% working interest on 480 acres and 15-25% working interest on the remaining 240 acres. The net revenue interest on the entire acreage is approximately 75%. Management believes, based on its review of the property to be acquired and its experience in this geographic area, that a number of future development and exploitation enhancement opportunities exist. The transaction is expected to close on or before June 30, 2005, with an effective date of June 1, 2005, subject to certain closing conditions.
The company plans to finance the planned acquisition through borrowings under its bank credit line which was recently increased to $50 million with an immediate borrowing base of $35 million.
Tim Rochford, president and CEO of Arena, stated, "This acquisition adds to our core Permian Basin properties base in west Texas and New Mexico, and complements the current drilling and development schedule on our Fuhrman-Mascho prospect by increasing our inventory of available drilling locations. It also reduces our operating costs as these properties include a commercial disposal well which we currently pay to utilize."
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