Dallas-based Energytec Inc. said Tuesday that it has recently closed the acquisition of a 65-mile natural gas pipeline and 13 associated wells in East Texas. The independent oil and gas company said the acquisition continues its emphasis on East Texas as an area of multiple opportunities suitable to its expertise.
Energytec noted that the total consideration included cash, 175,000 shares of its restricted common stock, the assumption of approximately $1.9 million in bank debt and approximately $800,000 in royalty and trade accounts payable. In conjunction with the deal, Energytec said it has obtained a bank loan of $400,000 to perform remedial enhancement projects to increase production from the associated wells.
“We feel the acquisition was made on very favorable terms,” said Frank W. Cole, chairman of Energytec. “To replicate the 65 miles of six-inch pipeline today would cost in excess of $7 million; moreover, it is unlikely that such a project could even be accomplished given the current legal and regulatory environment and difficulties in obtaining rights-of-way.”
He added that the acquired properties are expected to make “very significant” contributions to the company’s future revenues, cash flow and net income. “In addition, the remedial and enhancement work on the wells should further increase cash flow, in light of today’s oil and gas prices,” he said. Cole noted that although all 13 of the acquired wells have extensive production histories, only six are currently producing. The pipeline and wells are located approximately 20 miles southwest of Texarkana.
The chairman said that over the near future, third-party operators in the area will be encouraged to utilize the pipeline to transport gas from their wells, many of which have been shut in for lack of available transportation facilities. He added that the first significant financial contributions from the properties will be made during Energytec’s first quarter ended March 31, 2003.
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