Infinity Energy Resources Inc., an independent oil and gas exploration and development company, announced that its wholly owned Infinity Oil & Gas of Wyoming, Inc. subsidiary entered into a definitive Asset Purchase and Sale Agreement with Forest Oil Corporation on Dec. 27, 2007.
Under the terms of the Asset Purchase and Sale Agreement, Infinity-Wyoming has agreed to sell, and Forest Oil has agreed to purchase, essentially all of Infinity-Wyoming's producing oil and gas properties in Colorado and Wyoming, along with 80% of the working interest owned by Infinity-Wyoming in undeveloped leaseholds in Routt County, Colorado and Sweetwater County, Wyoming, for $17.4 million in cash, subject to ordinary and customary adjustments from the effective date of Oct. 1, 2007, through the date of closing, which is anticipated to occur on or about Jan. 7, 2008. The closing of the Asset Purchase and Sale Agreement is contingent upon the satisfaction of certain customary closing conditions.
Infinity currently expects the adjusted proceeds from the sale to be approximately $16 million. Sale proceeds will be utilized to (1) retire approximately $12 million in outstanding bank debt; (2) settle open oil and gas commodity derivative liabilities of less than $2 million; and (3) pay accrued interest and forbearance fees and prepay interest totaling approximately $0.8 million to Amegy Bank N.A. The remainder of the sale proceeds, along with amounts to be received from Forest Oil under the Farmout and Acquisition Agreement described below, are anticipated to be reserved for the payment of certain accounts payable and accrued liabilities.
"Not only will the transaction allow Infinity to significantly reduce its bank debt, but we will retain 100% ownership of the Piceance Basin and Labarge exploratory properties in the Rocky Mountains and have retained the right to a 20% working interest in any future wells that Forest may drill in the Sand Wash Basin on the exploratory acreage sold," stated Stanton E. Ross, chairman and CEO of Infinity.
Also on December 27, 2007, Infinity Oil and Gas of Texas Inc., a wholly-owned subsidiary of Infinity, entered into a Farmout and Acquisition Agreement for certain oil and gas leaseholds owned by Infinity-Texas in Erath County, Texas. The Farmout and Acquisition Agreement provides that Forest Oil will operate and earn a 75% interest in the spacing unit for each well in a 10-well drilling program. If Forest Oil completes the drilling program, Forest Oil will earn a 50% interest in the approximate 31,000 remaining undeveloped net acres and existing Erath County infrastructure owned by Infinity. The drilling obligation begins no later than March 15, 2008. Infinity Texas retains 100% of its interest in all currently completed wells and 100 acres surrounding each currently completed well.
"The acreage involved in the joint venture is largely undeveloped, and Infinity will retain full ownership of the 24 wells we have drilled in the northern portion of Erath County, along with our acreage and wells in Comanche County, Texas," Ross said.
"Looking forward, in addition to the prospects for our joint venture with Forest Oil in Texas and the exploration potential of our other properties in Texas and the Rocky Mountains, Infinity management will devote its primary attention to our 1.4 million-acre offshore oil and gas concession in Nicaragua. We are scheduled to travel to Nicaragua again in January 2008 for what will hopefully be a productive meeting with federal and regional government representatives to finalize our exploration contracts. Once the contracts have been signed by all parties, Infinity plans to acquire additional seismic information and pursue discussions with potential partners in what we believe has the potential to be a 'world-class' oil and gas development opportunity," concluded Ross.
Infinity has filed a Current Report on Form 8-K with the SEC that provides significant additional information on the subjects discussed in this press release. Investors are encouraged to review such Form 8-K filing in detail.
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