Tuesday, July 8, 2008

Houston-based Dune Energy to sell off Barnett Shale assets in Denton and Wise Counties

By Pegasus News wire

Dune Energy, Inc. has signed a Purchase and Sale Agreement to sell its Barnett Shale assets located in Denton and Wise Counties, for $41.5 million. BMO Capital Markets rendered a fairness opinion to Dune's Board of Directors on this transaction. The effective date of the sale will be May 1 with closing expected to occur on or before July 31.

As of December 31, 2007, Dune's Barnett Shale proved developed reserves totaled 19.3 Bcfe in 35 producing wells, plus 6 wells with behind pipe pay awaiting fracture stimulation. An additional 13 proved developed locations contained an estimated 14.1 Bcfe of net reserves.

The Barnett Shale reserves represent approximately 19% of Dune's total proved reserves, but only 6.8% of Dune's year-end 2007 SEC Present Value discounted at 10%. First-quarter 2008 revenue attributable to Dune's Barnett Shale operations totaled $7.64 per Mcfe, while expenses were $4.36 per Mcfe. In sharp contrast, Dune's Gulf Coast operations yielded revenue of $12.14 per Mcfe, while costs totaled $4.14 per Mcfe. Reflecting the preceding, operating profit for the Barnett Shale and Gulf Coast were $3.28 and $8.00 per Mcfe, respectively.

The disposition of the Barnett Shale properties will allow Dune to focus on the substantially higher rates of return generated by its Gulf Coast fields, the majority of which were acquired last year. Proceeds from the sale, after customary purchase price adjustments, will be utilized to eliminate borrowings currently outstanding under Dune's revolver, and for general working capital.

Proforma for the sale, Dune's proved reserves will consist of 60% natural gas and 40% oil. For the remainder of 2008, the Company will continue its active exploitation program in its Gulf Coast fields, concentrating on numerous workovers and low to moderate risk drilling designed to ramp production and cash flow. Dune fully expects that it will replace the production lost stemming from the sale of its Barnett Shale assets, with fourth quarter volumes to exceed current levels. Therefore, Dune's annual production guidance given at the end of the first quarter of 2008 totaling approximately 15 Bcfe, remains unchanged. Second quarter production is anticipated to average approximately 40 MMcfe/day.

James A. Watt, Chief Executive Officer and President, stated, "The disposition of the Barnett Shale assets represents a turning point in Dune's overall corporate strategy, which is designed to enhance shareholder value via a concentrated focus on the exploration and development of our superior portfolio of Gulf Coast properties. Our Gulf Coast properties, as we demonstrated during 2007, allow the Company to benefit from solid reserve replacement at a much higher rate of return and lower operating costs. This will be our focus moving forward. The management and Board of Directors are redoubling our effort to build shareholder value."

Source: Dune Energy

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