The Agreement provides that we purchase Voyager’s remaining properties, consisting of 2,457 gross acres, in two separate closings for total consideration of $32.8 million. Management estimates that these properties contain proved reserves totaling 29.9 BCFE plus probable reserves totaling 16.1 BCFE, for a total of 46 BCFE, representing an acquisition cost of $1.09 per MCFE for proved reserves and $0.71 per MCFE for proved plus probable reserves.
On October 10, 2006, Dune purchased an initial $7.0 million of Voyager’s remaining properties. The new Agreement provides that the balance of Voyager’s assets, totaling $25.8 million, be acquired by Dune on or before January 19, 2007. Dune’s obligation to purchase such remaining assets is subject to financing.
The assets purchased on October 10, 2006 consist of 857 gross acres, two producing wells thereon, and two wells drilled and scheduled for fracture stimulation prior to year end. There are also a total of 18 additional drilling locations, three of which management presently anticipates will be drilled horizontally. The two producing wells that Dune acquired in this closing are the Underwood and Smith-East wells, which Dune placed on production August 30, 2006 and September 7, 2006, respectively. Management has estimated proved reserves totaling 11.9 BCFE and probable reserves totaling 3.5 BCFE were acquired at a cost of $0.59 per MCFE for proved reserves and $0.45 per MCFE for proved plus probable reserves. Dune drew down $4.0 million from its Senior Credit Facility in connection with this purchase.
The remaining Voyager assets totaling $25.8 million consist of 1,600 gross acres, with 29 additional drilling locations identified. Up to one third of this acreage is expected to be drilled horizontally. Management has estimated that these properties contain proved reserves totaling 18 BCFE and probable reserves of 12.6 BCFE, representing a potential acquisition cost of $1.43 per MCFE of proved reserves and $0.84 per MCFE for proved plus probable reserves.
Analysis: More property in the fairway of the hottest gas play in the US. Awesome move and we might have caught the bottom on this one as we are up 31% in just a few weeks. We are entering the best part of the year for gas prices so it looks like all system go. I would buy on a pullback.