Phoenix Completes Acquisition of Cabot Gulf of Mexico Assets

Phoenix Exploration has completed the previously announced purchase of substantially all of the Gulf of Mexico and south Louisiana assets of Cabot Oil and Gas Corporation and one of its affiliates. The transaction was closed on September 29 and was effective as of August 1, 2006. In connection with the closing, Phoenix assumed the hedges that Cabot effected in connection with entering into the transaction on August 25. These hedges cover a substantial portion of the anticipated production from the properties for the period from October 2006 through December 2010, and consist of crude oil swaps at prices from $70.37 to $76.30 per barrel and natural gas swaps at prices from $8.135 to $9.745 per mmbtu. Phoenix financed the acquisition with a combination of equity contributed by its private equity investors and debt provided under its existing credit facility.

The properties acquired include interests in numerous fields located onshore and in state waters along the Louisiana Gulf Coast, as well as 30+ offshore leases on the Gulf of Mexico shelf. The total acreage associated with the properties includes over 200,000 gross acres and over 180,000 net acres. The reserve base is approximately 70% natural gas. During its ownership of the properties, Cabot internally developed 20 exploitation prospects and 35 exploration prospects, all of which Phoenix acquired in the transaction. Phoenix estimates these prospects have a total unrisked reserve potential of 1.2 tcfe.

Phoenix Chief Executive Officer, William H. Flores said, "We are very pleased with our acquisition of these properties. This acquisition creates a stable asset and cash flow base from which to further develop Phoenix while it also includes significant upside opportunities. A sizeable portion of this upside is 'drill-ready' due to Cabot's dedicated efforts to maximize the value of the properties. We believe that the properties have substantial additional upside that we can exploit through an aggressive redevelopment program, the efficient application of advanced seismic processing, state of the art exploration methodologies and our team of outstanding explorationists. We are also pleased to have Cabot's nine experienced field personnel become part of the Phoenix team." Concluding his remarks, Flores said, "Our goal is to create value through a balanced strategy of exploration and acquisitions. This acquisition represents the first component built upon the foundation of this strategy."

The Houston office of Mayer, Brown, Rowe & Maw LLP assisted Phoenix in the transaction.