Arena Resources, Inc. ("Company") announced today it has signed a letter of intent to produce and sell gas from its Fuhrman Mascho ("Fuhrman Mascho") properties in Andrews County, Texas, to Aspen Pipeline ("Aspen") of Houston, Texas. The gas, produced from the Yates formation at an approximate depth of 3,000 feet, has a high nitrogen content and is often considered too costly to produce because of the need to remove the nitrogen before transporting. Aspen announced in February 2007 a Memorandum of Understanding with Texas Independent Energy ("TIE") that could lead to the construction of a dedicated pipeline to TIE's 1,000-megawatt energy generation facility just outside Odessa, Texas, which can consume a blend containing Yates formation gas without removing the excess nitrogen.
Arena's Fuhrman Mascho properties comprise approximately 17,000 acres. The Company initiated a development program at the Fuhrman Mascho in April 2005 and has currently drilled 177 wells to a deeper, oil-bearing formation at approximately 4,800 feet. Arena has the drilling rights to the Yates gas formation on 14,000 acres and has agreed to dedicate the Yates gas reserves to the project for the life of the reserves. Based on 40-acre spacing, the Company estimates there are 350 potential locations including approximately 100 idle or temporarily abandoned well bores which were drilled prior to Arena's acquisition of the properties. These wells were drilled to the deeper, oil-bearing formation and are excellent candidates to be re-completed at the shallower Yates formation. The agreement requires Arena to drill or recomplete 60 - 90 wells per year for a four-year period and to strive on a best efforts basis to attain a volumetric goal of 31,000 - 37,000 mcf per day or more. It is estimated that construction of the pipeline will reach the properties by the 2nd quarter, 2008.
Mr. Tim Rochford, CEO, stated, "Since acquiring our initial Fuhrman Mascho properties in December 2004, we have explored various options for development of the Yates gas formation. We believe that this agreement with Aspen Pipeline provides Arena with the best opportunity to fully develop and market the Yates gas production by providing a delivery system and an established purchaser. We plan to begin our drilling/recompletion program in the third quarter with an estimated capital expenditure budget of $45 million over the next four years."
About Arena Resources, Inc.
Arena Resources, Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico.
This release contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, without limitations, statements with respect to the Company's strategy and prospects. Readers and investors are cautioned that the Company's actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company's ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.
Contact:
Arena Resources, Inc.
Bill Parsons, 480-947-1589
Source: Arena Resources, Inc.
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