Doral Energy has executed a binding letter of intent to acquire two unnamed Permian Basin oil and gas corporations with producing properties in Cochran and Hockley Counties, Texas for a total purchase price of $5.90MM. These acquisitions will increase Doral's daily net production by 81 barrels of oil equivalent per day ("BOEPD"). In-house engineering estimates show that these two acquisitions will provide Doral Energy with approximately 4,000,000 barrels of oil equivalent of total proved reserves.
The assets of these corporations are made up of twenty-seven (27) leases containing approximately 3,560 acres, all held by production ("HBP") and all operated, with average working interest of 89.11% and average net revenue interest of 63.04% (14 leases with 100% working interest). Producing fields include the Levelland, Levelland NE, Smyer, and Clauene North fields with depth rights ranging from 5,500' - 8,500'. Current gross daily production is 128 BOEPD (81 BOEPD net), 80% oil, from 53 producing wells, 2 water injection wells, and 5 shut-in wells (60 total wells). Doral Energy has identified a number of workovers, recompletions, and repair jobs to increase near-term production, plus ninety-nine (99) proved undeveloped ("PUD") infill drilling locations based on 20-acre infill well down-spacing.
Doral Energy Chief Executive Officer, E. Will Gray II states, "Doral Energy is pleased to be able to acquire such producing assets thus building upon our existing reserve base. We have been quite busy these past few months not only with managing our current portfolio of assets but with our M&A activity as well. A combination of organic growth in addition to growth via mergers and acquisitions should allow Doral Energy the opportunity to emulate the success of other corporations that have demonstrated the achievability of this growth strategy within the Permian Basin. This business model could potentially yield the same sort of returns other Midland-based E&P entities have demonstrated to Wall Street over the past decades."
Mr. Gray continued, "In following this proven business model, an organization must capitalize on economies of scale so that lifting costs can be kept to a minimum. With the acquisition of these two oil and gas corporations, as well as the acquisition of the Miltex Oil Company assets outlined in our press release of April 21st, Doral Energy will now have in excess of 6,000 net acres, all held by production in Cochran and Hockley Counties, creating a second core operating area for Doral where we will have ability to increase operating efficiency while reducing operating costs." Mr. Gray concludes, "Doral is proving that we can execute on our business model thus placing management in a very strong position to achieve our 2009 calendar year goals. If achieved, Doral will be poised for a very aggressive start in 2010, potentially adding tremendous value to the market capitalization of our great organization."
Doral Energy expects to execute the Purchase and Sale Agreement with these two corporations no later than May 15, 2009. Closing is scheduled for June 30, 2009 with an effective date of June 1, 2009, with an extension clause that will allow Doral to delay closing to July 31, 2009 with an effective date of July 1, 2009, if necessary. Further information on this transaction will be disseminated to shareholders as it comes available.
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