Paxton Energy Inc., San Francisco, Calif., (OTCBB: PXTE) plans to acquire Virgin Oil Company Inc. of Louisiana, which is currently a debtor in possession under a Chapter 11 proceeding.
The shareholders of Virgin will receive an aggregate of 70 million shares of Paxton common stock in exchange for all of the issued and outstanding shares of Virgin common stock. Upon closing, Virgin will be a wholly-owned subsidiary of Paxton, and Paxton anticipates subsequently changing its name to Virgin Oil Co. Inc.
Virgin currently owns interests in multiple active leases in the Gulf of Mexico, covering approximately 50,000 acres. All are less than 100 miles from the Louisiana shoreline in water depths of between 40 and 200 feet. Virgin also owns an interest in one active onshore lease located in Empire Field in Plaquemines Parish, Louisiana.
The most recent third-party reserve report prepared for Virgin, dated May 13, 2010, by James F. Hubbard (whose work for Virgin goes back to the 1990s under S.A. Holditch & Associates, which became Schlumberger Technology Services), calculates Virgin's net proven reserves at 6.4 million barrels of oil equivalent (BOE) in addition to net probable reserves at 1.8 million BOE.
In September 2008, Hurricane Ike caused significant damage to Virgin's existing operations. While past hurricanes resulted in only a few days of shut-down time on the offshore properties, Ike's damage to these pipelines took several months to repair and in Virgin's case production was not re-established on its properties until June 2009. This ten month down-time resulted in Virgin's creditors filing an involuntary bankruptcy petition against Virgin under Chapter 7 of the Bankruptcy Code, which was subsequently converted into a Chapter 11 proceeding.
Virgin was incorporated in March of 1996 for the purpose of oil and gas exploration, development and production.
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