Houston-based junior exploration and production company Dune Energy Inc. said Wednesday it agreed to acquire Goldking Energy Corp. for $320.5 million in cash and stock. Goldking holds a diversified mix of oil and gas properties spread over some 65,000 net acres.

The properties, located onshore along the Gulf Coast in Louisiana and Texas, provide meaningful current production coupled with numerous near-term development opportunities, as well as company-making exploration potential, Dune said. On a pro forma basis, Dune will have estimated proved reserves of 142 Bcfe, of which approximately 41% would be classified as proved developed and 63% would be natural gas.

Consideration will consist of $302.5 million in cash (subject to adjustment) and $18 million of newly issued common shares. Based on a 2006 year-end third-party engineering report, Dune will acquire 112 Bcfe of proved reserves as well as an existing 3-D seismic data inventory.

The company will have significant sustainable cash flow as most Goldking assets have extensive production history, which complements existing Barnett Shale "gas manufacturing," the company said. Dune also will have a high degree of operational control in more than 90% of the producing wells with an average working interest of more than 90%. There is sizeable deep pool and sub-salt exploration potential and a multi-year drilling inventory.

"This acquisition transforms Dune into a substantial, highly focused independent E&P [exploration and production] company with a balanced portfolio of development drilling and high-impact exploration," said Dune Chairman Alan Gaines. "The transaction will be immediately accretive to Dune's cash flow, production and net asset value..."

"We have numerous opportunities for exploitation of existing reservoirs and deeper pool tests on these properties utilizing current technology and the talents of the technical teams," said Dune CEO James A. Watt.

Dune delivered a $15 million earnest money deposit to the selling shareholder of Goldking, which will be credited against the purchase price at closing. The proposed acquisition is subject to customary closing conditions. Dune intends to utilize a combination of debt and equity in order to fund the acquisition and the closing of the transaction is contingent on Dune's ability to raise sufficient capital. Dune expects to close the acquisition on or before May 28.

Dune entered into a credit agreement with Jefferies Funding LLC, pursuant to which Jefferies advanced a total of $65 million. The proceeds were used to purchase outstanding loans under Dune's prior credit facility, to pay the $15 million earnest money deposit, to fund Dune's current development and for general working capital.

In October Dune said it would spend $32.8 million to acquire 2,457 gross acres on the Barnett Shale fairway in Denton County, TX, from Voyager Partners Ltd. Dune had earlier purchased $31.8 million of Voyager's Barnett properties (see Daily GPI, Oct. 16, 2006). In 2005 Dune acquired interests in about 320 acres of oil and natural gas leases and four producing wells in Denton County for $5.4 million, and another parcel of properties in Denton and Wise counties from Voyager for $68.3 million (see Daily GPI, Nov. 22, 2005).

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