LEXINGTON, Ky., May 7, 2009 (GLOBE NEWSWIRE) -- NGAS Resources, Inc. (Nasdaq:NGAS) today announced that it has entered into a farmout agreement with Chesapeake Appalachia, LLC for a tract of 56,000 gross (42,000 net undeveloped) acres in the southern portion of the Appalachian Basin. The farmout acreage is contiguous to the Amvest portion of the company's Stone Mountain field in Letcher and Harlan Counties, Kentucky. Chesapeake will continue to own over 100 producing wells and a gathering system that connects to NGAS' gathering system.
Penn Virginia Operating Company, LLC, the royalty owner, and Chesapeake each have participation rights for up to 25% of the working interests in the company's future wells on the acreage. NGAS has an annual drilling commitment of four wells under the farmout, with an additional commitment to drill six vertical Devonian Shale wells by the beginning of June 2009.
To meet the company's initial commitment, NGAS entered into an arrangement with a joint venture partner that provides NGAS with a 15% carried working interest in these wells. The joint venture partner will have the right to participate in up to 50% of the company's available working interest in subsequent wells on the acquired acreage.
William S. Daugherty, President and CEO of NGAS commented, "This farmout increases our acreage position in an area that we believe has strong horizontal Devonian Shale potential." Mr. Daugherty added, "We are moving two drilling rigs on location today and will start drilling immediately. Although the first six wells will be drilled vertically, we expect future drilling in the Devonian Shale to be horizontal."
Since February 2008, NGAS has successfully drilled 23 horizontal Devonian Shale wells across its southern Appalachian Basin acreage. The acquisition increases NGAS' total southern Appalachian Basin holdings to 329,000 gross (233,000 net) acres.
About NGAS Resources
NGAS Resources is an independent exploration and production company focused on unconventional natural gas basins in the United States that provide repeatable drilling opportunities, principally in the southern portion of the Appalachian basin. Additional information, including the company's most recent form 10-K and proxy statement, can be accessed on its website at www.ngas.com.
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Forward Looking Statement
This release includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act relating to matters such as anticipated operating and financial performance and prospects. Actual performance and prospects may differ materially from anticipated results due to economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the company, including risks of production variances from expectations, volatility of product prices, the level of capital expenditures required to fund drilling and the ability of the company to implement its business strategy. These and other risks are described in the company's periodic reports filed with the Securities and Exchange Commission.