Best Energy has been selected to fulfill a two-year contract with an undisclosed major oil and gas company to provide over that period up to six of its workover rigs to the customer working continuously during the contract period. The contract is for two years -- one year and a one-year option. The selection of the Company was pursuant to a sealed bid process initiated by the customer in late October 2009. The contract is set to commence on January 1, 2010.
Best Energy has recently been working 9-11 rigs in the Hugoton Basin for other customers. The Company noted that activity in the field has been rising steadily over the past month as natural gas prices in the Basin have begun to increase. Assuming no further increases in utilization by its customers, at six rigs under the new contract, the Company will have increased its fleet utilization to in excess of 15 rigs. Best Energy has 25 rigs available for deployment in its existing fleet. Prior to the implementation of this contract, the Company estimated it had grown its share of the workover market in the Hugoton from 35% one year ago, to in excess of 80% currently.
Commenting on the new contract, Eugene Allan, General Manager for Best Energy in Liberal, Kansas stated, "We are very pleased to have won this contract. The award of this contract underscores the quality of work provided to our customers by our field personnel, and likewise our information and accounting systems that provide our customers significant comfort in Best's performance on and after the job. Of equal or greater importance, our being granted this contract speaks to our exceptional safety record in the field. Best Energy Services has logged over a year of no lost time due to safety incidents."
Mark Harrington, Best Energy's Chairman and CEO, also discussed prospects for the coming year stating, "As we discussed on our shareholder conference call this past quarter, during 2009 we have had a laser focus on driving down costs and discontinuing unprofitable lines of business. An example of that is our reduction in Corporate G&A expense from a $5.4 million run rate, prior to the October 2008 management swap, to under $80,000 per month currently. With that accomplished, in recent months we have turned our attention to revenue generation and potential deleveraging opportunities. For 2010, we are working to implement new initiatives to further increase revenues through the development of our Hugoton Basin Financing Partners product. At the same time, we are working to deleverage our balance sheet with the sales of our contract drilling equipment in our discontinued Moab, Utah operations and through our newly created subsidiary, Best Energy Ventures. Financing for both the Hugoton Basin Financing Partners and the Best Energy Ventures initiatives is being actively pursued with various institutional sources."
Mr. Harrington concluded, "Having worked through some extremely challenging issues and market conditions over the past year, 2010 shows considerable promise for our Company, with a greatly slimmed down cost structure, generic growth in our Hugoton Basin market, our newly awarded contract and creative revenue and deleveraging initiatives. I thank all our shareholders, our bankers at PNC Credit and, of course, the extremely dedicated workforce in Liberal, Kansas and here in Houston for their tireless work and support over the past year."
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