The Company announced in June 2004 that it had entered into a definitive agreement to acquire a 75% working interest in approximately 3,000 net leasehold acres located in Jack, Wise, and Palo Pinto Counties in the State of Texas as part of a 20 plus Barnett Shale gas well horizontal drilling venture with Pathways, comprised of Texas based Hunt family entities. Amendments to the original definitive agreement provide Lexington with a greater 75%-100% working interest in wells to be drilled and increased initial acreage of up to 3,600 Barnett Shale targeted acres in Jack and Palo Pinto Counties in the State of Texas, with the potential to drill up to 22-26 wellbores.
The Company's contract operator, Oak Hills Drilling and Operating, LLC. ("Oak Hills"), becomes the Operator for this project and contributes at least one drilling rig until project completion. Oak Hills is currently operating as a contract drilling operator of horizontal gas wells in the Barnett Shale; the Company is seeking to acquire Oak Hills after negotiated conditions precedent are effected.
About the Barnett Shale: According to the American Association of Petroleum Geologists, over 1 trillion cubic feet of gas has already been produced by the Dallas Fort Worth area Barnett Shale play. Current well completions average 1.5 wells per day. The Barnett Shale produces more than 50% of all shale gas produced in the United States. Using a geology-based assessment methodology, the U.S. Geological Survey estimated a mean of 26.7 trillion cubic feet (TCF) of undiscovered natural gas, a mean of 98.5 million barrels of undiscovered oil, and a mean of 1.1 billion barrels of undiscovered natural gas liquids in the Bend Arch-Fort Worth Basin Province.
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