The Company acquired the South Gillock and State Kohfeldt Units in April 2005 for $3.5 million in cash and stock. The Company conducted an extensive workover program on the units in late 2005 and early 2006 in an attempt to increase production from existing wells but achieved only limited success. Earlier this year, the Company drilled the SGU #96 well to exploit the gas cap in the South Gillock Unit; however, the results of the SGU #96 have been disappointing. In addition to the cash consideration, the sale relieves the Company of an estimated $2 million in plugging and abandonment liabilities. The Company will seek to farmout its deep rights to a partner to test the lower and middle Frio as well as the Vicksburg.
The sale of the Jarvis Dome property included approximately 900 acres of leases (some nearing expiration) and production of approximately 40 mcf per day.
The Company also announces it has paid down $2 million in principal on its short-term loan agreement with Quest Capital Corp. and extended the maturity date for the outstanding principal loan balance of $2 million from November 30, 2007 to March 31, 2008 under existing terms.
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