Of the 5,800,000 shares offered, 4,205,000 shares will be sold on a firm commitment basis at a price to the public of $23.50 per share and 1,595,000 shares are being purchased on a best efforts basis by Bear, Stearns & Co. Inc. and J.P. Morgan Securities Inc., each acting as an agent for one of its affiliates, to facilitate their hedging in connection with the capped call option transactions. The hedge shares, if purchased, will be offered by the purchasers themselves or through their broker-dealer affiliates from time to time at varying prices. Net proceeds from the offering, estimated at $109.7 million after the purchase of the capped call option for approximately $21.5 million and the payment of expenses, will be initially used to pay down current indebtedness under the Company's senior bank credit facility which may then be reborrowed to provide incremental capital to continue development of the Company's Cotton Valley Trend acreage.
The offering, which is expected to close on December 10, 2007, is being made under the Company's existing shelf registration statement. The Company has also granted the underwriters a 30-day option to purchase a maximum of 630,750 additional shares of common stock from the Company to cover over-allotments.
In connection with the capped call option agreements described above the counterparties may engage in hedging activities which could have the effect of increasing, or preventing a decline in, the price of the Company's common stock following the pricing of the offering. The option counterparties or their affiliates will likely modify the hedge positions from time to time by purchasing and selling shares of the Company's common stock, other of the Company's securities or other instruments they may wish to use in connection with such hedging. This is particularly likely to occur just before or during the settlement periods for the options.
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