The joint venture provides the ability for the Company to drill continuously and simultaneously on its leases in both the Arkoma Basin, Oklahoma through Avatar Energy, LLC, and the Barnett Shale in Texas through Oak Hills; the Company is concurrently drilling in the Barnett Shale on the Company's Oliver Lease in Tarrant County, Texas. The Company maximizes development potential of its current Arkoma Basin lease inventory through continuous development, which prevents lease expiration. It also decreases drilling risk via the 50/50 working interest partnership. The development includes hands on input by the Company into all aspects of the development cycle from target geology to pipeline completion through its close working association with designated operator, Avatar Energy, LLC. Lexington maintains its 100% working interest in Texas based Barnett Shale property development.
Management estimates the Company's extensive CBM inventory is capable of 70-100 well bores with current acreage. New possible leases for acreage within the area of mutual interest in Hughes and McIntosh Counties, Oklahoma will also be acquired on a 50/50 equal working interest basis.
The Company plans both vertical and horizontal drilling to begin on or before the end of March 2006, first targeting the Company's South Lamar CBM Prospect located in Hughes County, Oklahoma. The Company receives up to $600,000 as payment for prospect acreage assignments pursuant to the 50% working interest participation by Dylan Peyton, LLC.
Innovative technology is currently available to make CBM drilling and completions more economic in the face of rising service industry costs. New drilling and fracing techniques are being successfully applied to CBM drilling in the Arkoma Basin that increase the economics of the play by deceasing drilling costs while increasing production.
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