Paxton believes that the acquisition will immediately generate $50,000 in new cash flow for the company. Planned re-work activities on the wells are expected to significantly increase production and resulting cash flow.
According to independent engineering reports obtained by Paxton, the net present value of the wells after all recovery expenses exceeds $2.2m. This assessment was based on an average price of $69 per barrel of oil at a discount rate of 10% (PV-10). Paxton has agreed to a total purchase price of $700,000, consisting of $600,000 cash and $100,000 in shares of Paxton’s common stock. The deal is expected to close within 30 days.
Charles Volk, CEO of Paxton, said: “The immediate and near-term prospects for these wells will allow Paxton to fund its operations in 2010. This acquisition will also position Paxton as an established, viable, independent developer of oil & gas properties.”
