The Oak Hills companies were acquired from the vendors for an aggregate of 6,000,000 restricted common shares in the capital of the Company. Assets of Oak Hills LLC have been independently valued at approximately $5.85 million and have a net tangible book value of $3.8 million subject to audit. For the nine months ended December 31, 2005, Oak Hills LLC had gross income of approximately $3.2 million subject to audit.
Having Oak Hills LLC drill Lexington's prospects will immediately decrease drilling costs to the Company on a consolidated basis. Equally important to the future profitability of the Company are its now vertically integrated operations, which will increase the Company's control over its oil and gas leasehold developments. This important step will ultimately add value to Lexington Resources as it becomes a vertically integrated junior oil and gas company with the capacity to take oil and gas from land acquisition through drilling and to completion.
The definitive Share Exchange Agreement replaced the Company's previously disclosed (by way of Current Report on Form 8-K dated September 22, 2005) Agreement In Principle, as previously entered into by the Company and Oak Hills International and Oak Hills LLC, and we confirm that each of the transactions contemplated by the Oak Hills acquisition have now closed effective on January 23, 2006. As a consequence of the completion of the Oak Hills acquisition, the Company indirectly acquired Oak Hills LLC as a wholly- owned subsidiary of Oak Hills International.
Oak Hills LLC is currently Lexington Resources' designated oil and gas operator for the Company's well interests in the Arkoma Basin and planned drilling on its Barnett Shale Project leases. Oak Hills LLC was created to drill and operate according to a delineated exploration and development program when the Company had difficulty obtaining drilling rigs during the latter half of 2004. Oak Hills LLC operates at least 75 wells for private clients in addition to its Lexington Resources wells, on a contract basis. Oak Hills LLC employs approximately 30-35 people and its Wilson Giant drilling rig operates on a 24-hour basis. 2005 was Oak Hill LLC's first year of substantial operation having acquired its drilling rig in late 2004 and spent Q4 2004 and Q1 of 2005 rebuilding and updating its Wilson Giant drilling rig. The drilling rig has been operating since April 2005 on independent contract drilling horizontal Barnett Shale wells in the Dallas Fort Worth Basin.
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