Crimson Exploration to acquire South Texas assets for $65 million
  by: OilOnline
  Thursday, May 01, 2008

Crimson Exploration Inc. has entered into a Purchase and Sale Agreement with a private company to acquire interests in four producing gas fields and undeveloped acreage in South Texas for $65 million in cash, subject to adjustment at closing for normal operations activity subsequent to the January 1, 2008 effective date and other customary purchase price adjustments. The transaction is expected to close on or around May 30, 2008. The total cash consideration due at closing will be funded with borrowings under the Company’s senior revolving credit facility. The Company currently has approximately $120 million of availability under that facility to fund at closing.

The assets being acquired consist of a 25% non-operated working interest in Samano Field located in Starr and Hidalgo counties, a 100% operated working interest in North Bob West Field in Zapata County and 100% operated working interests in Brushy Creek and Hope fields in DeWitt County. Crimson will be acquiring an interest in over 16,000 gross acres with these fields, most of which is held by production. This acquisition will further enhance the Company’s growing presence in the South Texas area.

Samano Field (5,600 gross acres) expands our commitment to the Vicksburg trend and complements our Cage Ranch Field assets in Brooks County. Both the operator of this field and Crimson have identified numerous exploitation opportunities in the Samano field including the possibility of downspacing to 20 acre units. According to the operator of Samano Field, drilling operations could begin as early as the summer of 2008 and could include as many as 6 gross wells in 2008.

North Bob West Field (8,000 gross acres) is in close proximity to other Crimson properties in Zapata County. Crimson has a team of geoscientists, engineers and landmen dedicated to working the Lobo and Wilcox trends in this stated growth area for the Company. Brushy Creek and Hope fields (3,200 gross acres) expand Crimson’s presence in the Middle and Lower Wilcox play. These assets are on trend with our Southwest Speaks Field located in Lavaca County where we are actively pursuing new drilling and workover ideas. These fields will strengthen our property base and add to our existing assets via additional drilling inventory and potential operational synergies, such as shared manpower.

Crimson is acquiring net production from the 137 producing wells of approximately 7 mmcfe of natural gas equivalents per day. Crimson estimates internally that net proved reserves acquired, as of the effective date, are approximately 23 bcfe of natural gas equivalents, for a price of approximately $2.82 per mcfe of proved reserves and $9,286 per mcfe per day of current production. The proved reserves are 71% PDP and 29% PUD, 96% natural gas and natural gas liquids and have a reserve life of approximately nine years based on current production. Approximately 56% of current production is operated. The Company estimates that 12 proved and 43 probable and possible drilling locations on these properties will expose it to future production increases and to approximately 60 bcfe of additional unrisked probable and possible reserves. This reserve estimate does not include potential downspacing at Samano Field which could lead to another 20 bcfe of reserves exposure.

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