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Escondido Sharpens Eagle Ford Focus

Escondido Resources II LLC of Midland, TX, has sold 11,050 net acres in the Eagle Ford Shale for $115.3 million. The sale consists of three distinct blocks of acreage located mainly in La Salle County in South Texas, Escondido said Tuesday.

Escondido said it will retain about 60,000 net acres in the shallow Escondido and Olmos formations, primarily in northern Webb County. It still owns the rights to the deeper Eagle Ford Shale formation in more than one-half of its acreage.

The transactions closed in December.

The company's first operated Eagle Ford well in Webb County has produced more than 1 Bcf of gas in its first eight months of production and is one of the strongest Eagle Ford wells drilled to date. Escondido recently drilled 11 horizontal wells in the shallow Escondido and Olmos sandstone reservoirs, which have exhibited "very encouraging early results," it said. The company said it intends to continue drilling of these shallow reservoirs during 2011, as well as drilling additional Eagle Ford wells in Webb County.

The sale "allows us to focus on our bread and butter Escondido and Olmos reservoirs, which are very economic even in today's low gas price environment, while still having a substantial position in the gas-prone portion of the Eagle Ford Shale," said CEO William E. Deupree. "Our acreage position was put together with the idea of pursuing multiple drilling objectives and our recent results in drilling horizontal wells in these reservoirs have far exceeded our expectations. These results have radically changed the perception of this historically marginal drilling area to one exhibiting extremely robust economics."

The company used proceeds from the sale to pay off debt and to increase its drilling budget for 2011. It is also pursuing the acquisition of additional leasehold acreage and properties in the region.

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