Mainland closed the sale of its Haynesville Shale assets in East Holly Field, DeSoto Parish, Louisiana. The assets have been sold to EXCO Operating Company, LP, a wholly owned subsidiary of EXCO Resources (NYSE:XCO - News), for US$28,159,000, effective January 1, 2010.
Mainland has sold its 40% working interest in all rights deeper than the base of the Cotton Valley formation (which has been defined to be 100 feet below the stratigraphic equivalent of the Cotton Valley formation) in the East Holly Field. Mainland continues to own a 100% interest in all rights above this depth, and specifically, in the Cotton Valley, Hosston and Upper Bossier sections.
The Company intends to use the proceeds of the sale to fund the drilling of the initial well (designated as the Burkley-Phillips No. 1 Well) on its Buena Vista prospect in Jefferson County, Mississippi, as well as to commence development drilling on the Hosston/Cotton Valley formations in the East Holly Field, and to retire its debt to Guggenheim Partners LLC.
The rights retained by Mainland in all formations above the base of the Cotton Valley formation in the East Holly Field encompasses 2,745.65 net acres with an estimated 65 net potential drilling locations. The four recent wells drilled by the original Operator through the Hosston and Cotton Valley zones to the Haynesville formation calculate as productive.
Based on the data and economics, Mainland plans to drill three wells as operator in the Hosston/Cotton Valley formations in 2010, and also to evaluate the shale gas production value of the Upper Bossier formation on its DeSoto Parish leases. The Company expects that these formations will provide continual solid pay with little risk and predictable development costs.
As previously disclosed in its news release dated March 25, 2010, Mainland, as operator, intends to drill the Burkley-Phillips No. 1 well to the Haynesville Shale formation on its Buena Vista prospect in Mississippi, where it currently holds in excess of 17,000 acres. The well is expected to be drilled to a total depth of 22,000 feet or a depth sufficient to evaluate the Haynesville Shale formation. Drilling is expected to commence in the latter part of the second quarter of 2010.
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