Edge Acquires South Texas Properties


Starr & Hidalgo Counties Vicksburg Play
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Edge Petroleum Corporation said that it has entered into an agreement with a private company to acquire certain oil and gas properties located in 13 counties in southeast and south Texas. In total, the acquired properties consist of approximately 143 gross producing wells (72 net) and an ownership interest in approximately 17,000 gross and 11,000 net developed acres and 56,000 gross and 16,000 net undeveloped acres of leasehold, all as of November 1, 2006.

The wells have an estimated net current daily production rate of approximately 31 MMcfe, which is about 86% natural gas. Edge will be the operator of about 97% of the total production. In addition to the property acquisition and related acreage, Edge will acquire from the Seller certain gathering facilities and ownership to approximately 13 miles of natural gas pipelines and related infrastructure serving the producing assets in southeast Texas. The pipeline system transports what will, after closing, be Edge gas as well as third-party gas.

Edge has also entered into an exploration venture agreement with the Seller whereby Edge will acquire 25% of the Seller's option and leasehold rights and agree to jointly pursue future oil and gas drilling opportunities in an approximate 95 square mile 3-D area with approximately 30,000 gross acres of leases and options located in Hidalgo County in south Texas. Edge further anticipates entering into agreements with the same Seller giving Edge exploration venture rights to participate in two additional exploratory plays generated by the Seller, significant portions of which are already at an advanced stage of development. Edge's working interest in these two ventures will vary between 12.5% and 25%. These two plays cover over 280 square miles of newly acquired and planned 3-D seismic data and over 115,000 gross acres under lease and option.

The effective date of the planned transaction is January 1, 2007 and the anticipated closing date is expected to be on or before the end of January 2007. Edge's internal reserve assessment as of the first of November is approximately 105 Bcfe of proved reserves which includes about 35 Bcfe of proved developed producing, 30 Bcfe of proved developed non-producing and 40 Bcfe of proved undeveloped reserves.

Edge's due diligence, to date, indicates at least another 45 to 50 Bcfe of additional resource potential may exist on the undeveloped leaseholds that are being acquired. Edge has committed to pay $320 million in cash for the producing assets, related developed and undeveloped acreage, pipeline and the Hidalgo County joint venture. The purchase price will be subject to adjustment for the results of operations from the effective date to the closing date and for other purchase price adjustments. Edge expects to allocate approximately $24 million of the $320 million purchase price to its unevaluated property cost pool and about $7 million to the pipeline and related assets, resulting in an estimated purchase price for total proved reserves of approximately $2.75 per Mcfe.

John W. Elias, Edge's Chairman, President and CEO, said:

"We are very pleased with the strategic fit of the asset base being acquired and are tremendously excited about the potential this acquisition presents for Edge. Based upon our internal forecasts and current market conditions we believe this acquisition provides accretive growth both financially and operationally and also believe there is significant remaining potential on the known asset base, the undeveloped leasehold and the exploratory prospects that are part of this transaction. These properties have an expected reserve to production ratio in excess of 9 years, lengthening our corporate R/P ratio, while providing a significant increase to our portfolio of future prospects. We have received and accepted a debt financing commitment to underwrite the entire purchase price from a financial institution. However, it is our plan to fund this transaction with a combination of debt and the issuance of new common equity such that upon closing, our capital structure will leave us with considerable financial flexibility and financial metrics that are accretive to our shareholders."

The acquisition is subject to usual and customary closing conditions including preferential purchase rights and consents to assign and is expected to close early in 2007.

Edge Petroleum Corporation is a Houston-based independent energy company that focuses its exploration, production and marketing activities in selected onshore basins of the United States.

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