Saxon Oil Purchases Kansas Oil Leases And Production

Dallas, TX - Saxon Oil Company Ltd. has completed the acquisition of working interests in 17 oil and gas leases with 26 wells operated by Castle Resources Inc. of Schoenchen, Kansas, for $2,170,004 USD in cash. The purchase includes all wellbore and surface equipment, as well as 3-D seismic surveys of the acquired acreage.

Located in north central Kansas, these wells typically produce from the Lansing-Kansas City or Arbuckle formations at depths ranging from 3,100 to 4,400 feet. Saxon, which acquired working interests varying from 59% to 89% in these wells, will act as operator for all 17 leases. Based on the wells actual production history, as reported by the Kansas Corporate Commission in April 2007, these wells averaged 94 barrels of oil per day (BOPD). The net production to Saxon's acquired interest is approximately 58 BOPD.

The acquisition is important to Saxon's growth strategy for several reasons. First, these producing oil assets increase Saxon's reserves base and monthly cash flow. Second, before this acquisition Saxon's production was primarily natural gas; because the acquired wells are all oil producing wells, Saxon's portfolio of production has become more evenly balanced between oil and gas. And third, the acreage acquired with these leases provide Saxon with a number of exploration and development drilling opportunities.

"Before this acquisition, Saxon was averaging 75 barrels of oil equivalent (BOE) per day," commented Steven D. Moore, CFO of Saxon Oil, who handled negotiations on behalf of Saxon. "About 85% of that production was natural gas. With this acquisition, we've increased our daily production by approximately 75%, and all this acquired production is crude oil. So going forward our daily production will be evenly divided between crude oil and natural gas, which should reduce risk and smooth out variances in monthly cash flow caused by the volatility of natural gas prices."

"Saxon has already started a maintenance and workover program on the wells, which should cut monthly lease operating expenses while boosting production," said Richard G. Green, President and CEO of Saxon Oil. "Further, we've also performed preliminary geological and reservoir engineering studies from the 3-D seismic surveys we acquired and have identified six to eight very drillable new well locations."

Earlier in the month, Saxon acquired a 100% working interest in the Pfannenstiel "B" oil and gas lease from Prairie Resources Inc. of Hays, Kan., for an undisclosed amount of cash. The lease, in the same general vicinity as the Castle leases, has four producing oil wells and sufficient acreage for several development wells (see press release dated September 5, 2007). Saxon also expects to carry out a 3-D seismic survey on the Pfannenstiel lease and adjacent acreage to pinpoint the best locations for potential development and exploratory wells in the area.

Saxon continues to view Kansas is an attractive growth area. Historically, Kansas ranks fifth among states in the United States in cumulative production with over 30 trillion cubic feet of gas (Tcf) and over 6.6 billion barrels of oil produced to date. Still, significant oil and gas reserves remain throughout central Kansas. In addition, central Kansas holds some of the largest reserves of helium in the world, a quickly depleting commodity that currently sells for more than $70 per thousand cubic feet.

SOURCE: Saxon Oil Company Ltd.