Mammoth Energy Group has announced its review of the 4th quarter 2008 performance of the field operator it hired to operate its oil and gas leases in Oklahoma. In management's opinion, that performance was insufficient. By mutual consent of the parties, the operator has terminated its operations on behalf of Mammoth Energy. As a result, Mammoth Energy will replace its field operator to improve its oil and gas production.
Mammoth Energy has identified a potential new operator that has many years of experience in the industry, and is currently negotiating a contract that would allow the replacement operator to have "boots on the ground" in Oklahoma to oversee the day-to-day operations of the Company's oil and gas leases to increase productivity. The potential replacement has already assisted the Company in favorably resolving several lien claims made during the 4th quarter of 2008.
"We were not satisfied with the operator's performance during the 4th quarter of 2008 and decided a change was necessary," said Joe Overcash, Mammoth Energy's CEO. "We received only one check for $300 from the operator in the 4th quarter of 2008, and we have received credible reports that at least one tank of oil from our leases, and perhaps more, have been extracted from the leased sites but not yet sold. We need to take, and are taking, steps to improve our revenues from these properties."
The Company is also seeking a satisfactory accounting of 4th quarter performance from the operator. A preliminary accounting has been provided, but several items require further information, which the Company is actively seeking.
In the 4th quarter of 2008, Mammoth Energy had oil and gas leases in 2 Oklahoma counties: Pawnee and Noble. Relying on the advice of its prior operator, the Company ceased all development of its Noble County leases, and the Company has undertaken no drilling on its Noble County properties to date. The Company then shifted the $147,000 earmarked for Noble County to acquire a larger well ownership in Pawnee County. Originally, MMTE was to have an interest in two wells in Pawnee County, but after the shift from Noble County to Pawnee County, the Company now owns interests in eight wells in Pawnee County.
Under the contracts in both Noble and Pawnee Counties, the Company owned only small minority interests in the oil and gas properties, and it remained a minority owner of the oil and gas leases in Pawnee County after the shift. Several other investor groups have much larger stakes in the operation. One in particular holds a 52% interest in the Pawnee County wells. This majority owner was likewise dissatisfied with the prior operator's performance and has taken over temporary operation of the properties until a more satisfactory operator is found. The Company expects that the new replacement operator will be under contract within 30 days. The majority owner's concerns, as well as MMTE's, will need to be satisfied in order to sign the replacement operator.
MMTE is also in negotiations with an oil and gas industry consultant who would work on acquiring other leases for MMTE to help the Company increase both its assets and its revenues during the first quarter of 2009.
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