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Ram Energy Buyout in Works by Ex-Petrohawk Chief

Former Petrohawk Energy Corp. CEO Floyd C. Wilson, who recently created Halcon Resources LLC, is working with a group of investors to buy Tulsa-based Ram Energy Resources Inc., a small-cap explorer that operates primarily in Texas, Louisiana and Oklahoma.

Wilson formed Halcon after Australia's BHP Billiton bought Petrohawk earlier this year (see Shale Daily, Aug. 22). The investor group partnering with closely held Halcon is led by EnCap Investments LP and includes Liberty Energy Holdings LLC and Mansefeldt Investment Corp.

Under terms of the recapitalization agreement, Halcon would invest $275 million in new common stock, invest $275 million in a five-year convertible note and provide warrants to purchase another 110 million shares of common stock. A majority of Ram's current shareholders agreed to the transaction, which is expected to close early next year. Jefferies & Co. currently is Ram's largest shareholder with a 22% stake.

Ram would become part of Halcon and Wilson would serve as chairman and CEO of the merged company.

On the news Ram's shares, which opened Thursday trading at $1.85, had jumped 80% at midday to about $1.98/share. More than 8.5 million shares already had traded hands, versus average daily volume of 145,586.

"We believe Ram provides a solid platform that when combined with this capital investment will enable the company to quickly add reserves and production by targeting and drilling in liquids-rich gas condensate and crude oil prone resource plays in the United States," said Wilson. "We intend to draw upon our extensive experience and lessons learned from our past endeavors in an effort to maximize shareholder value."

Ram CEO Larry E. Lee, who co-founded the company and owns a 13% interest, called Halcon's investment transformational. "We view this as a tremendous opportunity for Ram and its shareholders," said Lee. "Floyd Wilson has an outstanding track record of successfully growing small-cap E&P companies, such as Ram, into value-rich large-cap enterprises, as demonstrated by his recent sale of Petrohawk to BHP Billiton for $15 billion.

"This investment will provide the company with the capital necessary to expand operations into new and emerging resource plays, as well as accelerate development of our Mississippian oil concession in Osage County, OK. It will also allow for the continued development of our major oilfields in Oklahoma and Texas. Floyd and his team will lead the company as it expands in size and scope following the closing of this transaction."

Ram has been in business since 1987. In 2006 it merged with Tremisis Energy Acquisition Corp. and today is publicly held and traded on the NASDAQ (RAM). According to the company's website, estimated net proved reserves at the end of 2010 totaled 24.4 million boe, which were 54% weighted to crude oil, 36% to natural gas and 10% to natural gas liquids. Proved developed reserves comprised 62% of the total reserves.

Ram at the end of 2010 owned stakes in about 4,100 wells and was the operator for about 3,200 of the wells. Ram also owns a drilling rig, various gathering systems, a natural gas processing plant, service rigs and a supply company that service its properties. In 2010 the company drilled or participated in 70 wells, 62 of which were successfully completed as producing wells, one of which was a dry hole well and seven of which were either drilling or waiting to be completed. Production last year averaged nearly 5,921 boe/d.

When the transaction with Halcon closes Ram plans to issue 220 million shares of common stock to Halcon, representing about 74% of its pro forma outstanding common stock. The $275 million convertible note would bear interest at 8% a year and could be converted into common stock at any time subsequent to two years from the closing date.

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