Dune, Chesapeake Agree to Welder Ranch Farm Out

Dune Energy, Inc. said that it has entered into a farm out agreement with Chesapeake Energy Corp. covering Dune's Welder Ranch property, located in Victoria County, Texas. This agreement does not include existing producing properties.

The Welder Ranch comprises two leases held by Dune's wholly owned subsidiary, Vaquero Partners LLC totaling approximately 8,000 contiguous acres. Pursuant to the agreement, Chesapeake will pay Vaquero $1.8 million cash in exchange for 75% of Vaquero's interest in its two Welder Ranch leases. In addition, Chesapeake has committed to spud two wells by November 1, 2006, targeting the geo-pressured Middle Wilcox formation. Dune will be carried to casing point, and would subsequently pay for its proportional share of costs going forward. Any additional wells would be drilled by Chesapeake and Dune on a "heads up" basis.

“We remain optimistic that our Welder Ranch property has excellent potential for significant reserve additions, production and cash flow,” said Amiel David, Dune’s president and COO. “Chesapeake has had significant success adjacent to the northern boundary of our property, and we hope we can duplicate that success on our Welder Ranch acreage. This farm out certainly validates our original G&G.”

“Dune is quite pleased to have a company with the technical proficiency and expertise of Chesapeake as a partner on this potentially prolific property,” added Alan Gaines, Dune’s chairman and CEO. “Dune remains committed to the expansion of our onshore Gulf Coast and Fort Worth Basin core areas, and to continue to build shareholder value.”

Dune is an aggressive and rapidly growing oil and gas exploration and production company with operations presently concentrated along the Louisiana/Texas Gulf Coast as well as the Fort Worth Basin Barnett Shale.


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