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|Warren Resources Proposes to Purchase Oil and Gas Properties of Remaining Affiliated Drilling Programs|
NEW YORK, March 29, 2007 (PRIME NEWSWIRE) -- Warren Resources, Inc. (Nasdaq:WRES) has submitted separate proposals to acquire the respective oil and gas properties and related assets of five drilling programs that Warren formed from 2000 to 2003 and for which it serves as Managing General Partner. The approval of partners owning 51% of the interests of a drilling program is required in order for that drilling program to sell its properties. If a proposed acquisition is approved by the partners of a program, the effective date of that acquisition will be April 1, 2007 and its target closing date will be June 15, 2007.
The proposed purchase price for the properties of a program is based on the net present value of the estimated future revenues, discounted at 10% per annum (PV-10), of a program's estimated proved developed reserves, together with the fair market value of any water injection wells, as of February 1, 2007, as calculated by Williamson Petroleum Consultants, Inc., an independent engineering firm. Williamson Petroleum prepares Warren's and the drilling programs' annual reserve reports.
The PV-10 attributable to the aggregate proved oil and gas reserves of the five drilling programs is $33.2 million, and the estimated fair market value for related water injection wells is $4.4 million, resulting in a $37.6 million total purchase price for the properties if all five programs approve the sale of these assets to Warren. The purchase price will be paid in the form of restricted shares of Warren's common stock, with the common stock valuation calculated at a discount of 10% from the average publicly traded share price of Warren common stock for the period from May 1, 2007 to May 31, 2007. The properties being purchased by Warren are located in Wyoming, New Mexico and California, and include approximately 9.9 Bcfe of proved developed producing reserves which are primarily natural gas wells. In addition to the producing wells, Warren will also be acquiring 21.3 net coalbed methane wells that are currently dewatering. Warren believes production from these wells will incline and the wells will become economic in future years.
Also as part of its previously disclosed contractual commitments, Warren is obligated to accept, through and until June 30, 2007, withdrawal-for-cash requests from the partners in its two 1999 drilling programs. If all the partners in the two 1999 programs elected to withdraw for cash, the aggregate purchase price would be $4.8 million, consisting of a $3.9 million PV-10 as of February 1, 2007, for the proved reserves (including approximately 1.2 Bcfe of proved developed producing reserves), together with an estimated fair market value of $0.9 million for the water injection wells. As an alternative to this cash withdrawal, Warren is proposing to pay $5.97 million in restricted shares of its common stock, which shares are discounted at 20% from the average publicly traded share price for Warren's unrestricted common stock during the 90-day period from January 1, 2007 through March 31, 2007.
A sale by any of these programs of its properties in exchange for restricted shares of Warren common stock will require that program to distribute the common stock, and any other assets, to the partners of the program as part of a liquidation and dissolution of the program. This distribution, consisting primarily of restricted shares of Warren common stock, cannot occur until the shares have been registered with the Securities and Exchange Commission (SEC). For any program that receives the restricted shares of common stock, Warren will, in the fourth quarter of 2007, file a registration statement covering the distribution of the Warren shares to the partners of that program. It is anticipated that the SEC registration and the distribution of the shares would occur within one year of the date of sale, but it could take longer.
About Warren Resources
Warren Resources, Inc. is a growing independent energy company engaged in the exploration and development of domestic natural gas and oil reserves. Warren is primarily focused on the exploration and development of coalbed methane properties located in the Rocky Mountain region and its water flood oil recovery programs in the Wilmington Units located in the Los Angeles Basin of California. The Company is headquartered in New York, New York, and its exploration and development subsidiary, Warren E&P, Inc., is headquartered in Casper, Wyoming and Long Beach, California.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Warren believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the anticipated results or other expectations expressed in this news release. See "Risk Factors" in the Company's Annual Report on Form 10-K and other public filings.