Delta Petroleum Acquires Castle Energy Assets
Delta Petroleum Corporation has entered into a purchase and sale agreement to purchase all of the domestic oil and gas properties of Castle Energy Corporation for $20 million in cash plus 9,566,000 shares of Delta's common stock.
Closing of the transaction is expected to occur in April 2002. Pursuant to the terms of the agreement, the cash portion of the purchase price will be reduced by the cash flow generated by the properties between October 1, 2001 and the closing date of the transaction. The sale is subject to approval by the shareholders of Delta Petroleum Corporation. Each party is subject to penalties for failure to close the transaction. Delta may repurchase up to 3,188,667 of its shares from Castle for $4.50 per share for a period of one year after closing.
The properties to be acquired from Castle consist of interests in approximately 525 producing wells in fourteen (14) states, plus associated undeveloped acreage, with proved reserves of approximately 65 BCF of gas equivalent, of which proved developed producing reserves approximate 32 BCF of gas equivalent.
"We decided to sell our oil and gas properties for a substantial equity stake in Delta Petroleum because of Delta's significant undeveloped crude oil reserves, its potential to realize the value inherent in its federal leases offshore California, the opportunity to eliminate duplicative general and administrative costs and the fact that we can sell our domestic properties with only minor tax consequences at the present time," commented Joseph L. Castle II, Chief Executive Officer of Castle Energy Corporation.
"This is obviously a very significant event for our Company," noted Roger Parker, Chief Executive Officer of Delta Petroleum Corporation. "The acquisition of Castle's domestic oil and gas properties will more than double Delta's daily production, to approximately 3,400 barrels of oil equivalent (BOE), with the actual daily production approximately 50% oil and 50% gas. It also approximately triples our Company's proved producing reserves. We believe this provides Delta with a broad, strong base upon which we can build a much larger company in coming years."
"The producing properties being acquired from Castle should significantly increase Delta's annualized operating cash flow, before debt service, based upon current commodity prices," observed Aleron ("Buzz") Larson, Jr., Chairman of Delta Petroleum Corporation. "We also believe there is significant undeveloped reserve potential in the Castle properties." Upon closing, Delta's present four-person board of directors will be expanded with the appointment by Castle of three additional directors.