Lexington Resources Acquires Oak Hills Drilling
Lexington Resources has executed a definitive Share Exchange Agreement and has acquired 100% of the shares of Oak Hills Drilling and Operating International, Inc., a Nevada company,and its wholly owned operating subsidiary, Oak Hills Drilling and Operating, LLC, an Oklahoma company. Oak Hills LLC is a full service oil and gas well drilling, operating and completion company. It owns and successfully operates a 10,000- foot operating depth Wilson Giant triple mechanical drilling rig and is fully equipped to drill, complete, and operate oil and gas wells. This rig is well suited for drilling acreage owned by Lexington Resources in both the Barnett Shale areas of Texas and the Arkoma Basin in Oklahoma. In addition to its Wilson Giant drilling rig, Oak Hills LLC operates and owns a well workover rig, trucks, commercial excavation equipment, and trailers along with comprehensive well and pipeline completion equipment.
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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