pleasant surprise, page-7

Hi Nuke,

Sorry.

When I first read that announcement, I didn't really pay much attention to it. Since then, I have read a fair bit about the eagle ford shale and early indications are that it has great potential........O&G companies (small and large) are quietly accumulating as much of this acreage as possible.......if this play lives up to expectations, early entrants will be in a strong position. AZZ has acquired its acreage on the ground floor.

- AZZ has sold ownership rights of 5,102 gross and 4,840 net acres to Petrohawk for an "agreed sum"? ($50?)
- Additionally, for all wells drilled by Petrohawk on the leases pursuant to this term assignment, Antares will receive a working interest back-in after payout on a well by well basis. (So is that like a royalty, free-carried?)
- Petrohawk agrees to spud the initial test well within one year from the effective date of this term assignment. Antares expects the first well will be drilled in the second half of 2009. (Bring it on)
- The 5,102 gross and 4,840 net acres are exclusive of Antares' approximately 8,200 acre Yellow Rose lease position, which is adjacent and to the north of this term assignment. (even after this deal, we still have 8,200 acres right in the thick of it)

From what I have read, to produce from this formation you need to use directional drilling and fraccing = $$$$$
$5-7M per well.

AZZ don't have much doe at present, so by making this kind of deal with Petrohawk (a company with a $1B 09 exploration budget and two rigs full-time on this play), we expose ourselves to plenty of upside without any spending. And, we still have 50% of a decent acreage position next door. AZZ have also indicated the primary target for the current well is the good old edwards limestone formation but that "The Eagle Ford will be thoroughly evaluated in the Frances Dilworth No. 2".

Interesting extracts from recent AZZ announcements:
"Antares was delighted to have the opportunity to increase its working interest from 50% to 75% as it believes in the materiality of the Yellow Rose project. The prolific Edwards limestone targeted by the initial wellbore has the opportunity to deliver 40+ Bcf; such a result would
represent a company making event for Antares." (Yeah - company making event! But "initial wellbore"? = re-enter for horizontal eagleford drill one day?)

"Antares is also extremely encouraged by the surrounding activity regarding the Eagle Ford shale. Petrohawk Energy Corporation has called the Eagle Ford, "one of the highest quality shale reservoirs discovered in the US." The list of companies entering the play continues to expand and now includes the likes of Petrohawk, ConocoPhilips, Anadarko Petroleum, Pioneer Natural Resources and Apache. The Yellow Rose project area includes 8,200 acres of highly prospective
Eagle Ford shale. To date, Eagle Ford shale wells in the area of interest have estimated ultimate recoveries ranging between 4-7 Bcfe with an average estimated recovery of 5.5 Bcfe." (Sounds like James is right in the thick of it?)

Bye for now,
Whippet