Castle Energy Corp. has agreed to sell all of its domestic oil and gas properties to Delta Petroleum for $20 million in cash plus 9.6 million shares of Delta common stock, which would result in the company owning 43% of Delta. The properties consist of oil and gas interests in 525 oil and gas wells in 14 states, including associated undeveloped acreage, with total proved reserves of 65 Bcfe of gas, of which 32 Bcfe are proved developed producing reserves. The effective date of the sale was Oct. 1, 2001 and closing is expected by April 30.

Pursuant to the terms of the purchase and sale agreement, the cash portion of the purchase price will be reduced by the cash flow from the properties between the effective date and the closing date. Each party is subject to penalties for failure to close the transaction. Delta may repurchase 3.2 million of its shares from Castle for $4.50 per share over a period of one year after closing.

Castle CEO Joseph L. Castle II said the decision was based upon Delta’s significant undeveloped crude oil reserves, its potential to realize the value inherent in its offshore California federal leases, the opportunity to eliminate duplicate general and administrative costs and the chance for the company to sell its domestic oil and gas properties for a reasonable price with potential upside with only minor tax consequences.

Castle still owns a 50% interest in a drilling concession in Romania and a 35% membership interest in Networked Energy LLC, a private company engaged in the operation of energy facilities that supply power, heating and cooling services directly to retail customers.

Delta CEO Roger Parker said, “The acquisition of Castle’s domestic oil and gas properties will more than double Delta’s daily production, to approximately 3,400 boe, with the actual daily production approximately 50% oil and 50% gas. It also approximately triples our company’s proved producing reserves. We believe this provides Delta with a broad, strong base upon which we can build a much larger company in coming years.”

Delta Chairman Aleron “Buzz” Larson, Jr. said the producing properties should significantly increase Delta’s annualized operating cash flow, before debt service, based upon current commodity prices. “We also believe there is significant undeveloped reserve potential in the Castle properties.”

Upon closing, Delta’s present four-person board of directors will be expanded with the appointment by Castle of three additional directors. Denver-based Delta has producing properties in California, Colorado, New Mexico, North Dakota, Oklahoma, Texas, Wyoming and interests in one producing federal unit and four undeveloped units located in federal waters offshore California near Santa Barbara.

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