Cubic Energy, Inc. announces it plans to drill two new wells to the Haynesville Shale in the Company's northwest Louisiana acreage. The anticipated total depth of each well is 12,000 feet. The Estes 7 No. 1 is expected to spud within thirty (30) days, followed by the Red Oak Timber 5 No. 1. These wells will be Cubic's first drilled through the Haynesville Shale in the Company's southern acreage in Bethany Longstreet in Caddo and DeSoto Parishes, Louisiana. Cubic has a 35% working interest in these wells.
Cubic is also planning completion of four wells located in its Johnson Branch acreage. The Hudson 10 No. 1 will be completed in the Haynesville Shale formation in approximately thirty (30) days. After completion of the Hudson 10 No. 1, the Company will commence completion of the Daniels 3 No. 1, followed by completion of the Wilbanks 36 No. 1 and Bonomo 35 No. 1 wells in the Cotton Valley/Hosston Formations. Cubic has a 49% working interest in its wells located in Johnson Branch.
To finance this drilling and completion activity, the Company, on May 8, 2008, obtained an expansion in its borrowing base with Wells Fargo Energy Capital (WFEC) to $20,000,000. In order to draw on the borrowing base to $20,000,000, the Company agreed to an amendment of its credit agreement with WFEC whereby an existing $5,000,000 term loan from WFEC may not be pre-paid.
In addition, the Credit Agreement was also amended to permit the Company to issue a $2,000,000 subordinated note to Diversified Dynamics Corporation, an entity controlled by William Bruggeman, who is a greater than five percent (5%) owner of Cubic's common stock. As part of the consideration for the loan made pursuant to the subordinated note, the Company is granting to Diversified Dynamics Corporation a 0.375% (0.375 of one percent) net profits interest in the future production of hydrocarbons from its Louisiana properties, to be earned at the time of re-repayment of that indebtedness. The subordinated note will be used for general corporate and working capital purposes.
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