HOUSTON, Jan. 25, 2011 (GLOBE NEWSWIRE) -- Lucas Energy, Inc. (NYSE Amex:LEI), an independent oil and gas company, has entered into a letter of intent which provides it rights to buy up to a 77.5% interest in and operatorship of the Hospah field from a private company for an aggregate of $20.5 million. Lucas funded the purchase of an undivided 7.56% interest in the property for $2 million, and plans to purchase the balance of the interests, subject to funding.
"Strategically, this acquisition fits our business model of reworking old fields and plays to our core strengths," commented William A. Sawyer, president and CEO of Lucas Energy. "It also diversifies our asset base out of Texas."
The acquisition covers six shallow producing units and more than 100 existing well bores drilled to the Hospah oil and Dakota gas formations in McKinley County, New Mexico. Production averaged approximately 100 barrels per day of light sweet crude during 2010. Management believes that daily production can be increased to 500 barrels of oil and 2 million cubic feet of gas in the first year at a capital cost under $9 million. The development plan includes deepening certain wells and using them to re-inject formation water into non-producing zones, putting existing wells back on production, and by removing carbon dioxide from the natural gas to bring it up to pipeline quality.
Remaining items to close the balance of the acquisition include the completion of due diligence, title opinions, additional financing, and board approvals. The acquisition and development plans are expected to be financed through joint venture partners or a structured investment at the asset level.
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Forward-Looking Statement
This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Act") and Section 21E of the Securities Act of 1934, as amended (the "Exchange Act"). In particular, the words "believes," "expects," "intends," "plans," "anticipates," or "may," and similar conditional expressions are intended to identify forward-looking statements and are subject to the safe harbor created by these Acts. Any statements made in this news release about an action, event or development, are forward-looking statements. Such statements are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it can give no assurance that its forward-looking statements will prove to be correct. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding future drilling and production are subject to all of the risks and uncertainties normally incident to the exploration and development of oil and gas. These risks include, but are not limited to, completion risk, dry hole risk, price volatility, reserve estimation risk, regulatory risk, potential inability to secure oilfield service risk as well as general economic risks and uncertainties, as disclosed in the Company's SEC filings. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from those projected. The forward-looking statements in this press release are made as of the date hereof. The Company takes no obligation to update or correct its own forward-looking statements or those prepared by third parties that are not paid by the Company. The Company's SEC filings are available at http://www.sec.gov.