South Texas Oil Company Announces Settlement of Legal Proceedings
AUSTIN, Texas, May 22 /PRNewswire-FirstCall/ — South Texas Oil Company (“the Company”) today announced that on May 15, 2008 it settled a lawsuit and counter lawsuit between Leexus Oil & Gas, LLP, Mark Jaehne, and Bennie Jaehne regarding disputes arising under a previously reported Agreement and Plan of Merger, which Merger Agreement was executed by the parties on April 20, 2007. The Merger Agreement called for payment by South Texas Oil Company of $4,000,000 over time based upon a percentage of the production of certain oil and gas interests acquired by the Company under the Merger Agreement, plus the issuance of 1,333,333 shares of the Company’s common stock to the Jaehnes at closing. With this settlement, South Texas Oil Company has no lawsuits or claims pending by or against the Company arising out of the Merger Agreement.
The settlement provides for payment by the Company at closing of $2,000,000 and future payments of $2,000,000 payable in four equal installments every six months, which will extinguish all of the Company’s past, current and future obligations due to the Jaehnes, as selling shareholders under the Merger Agreement, including, without limitation, their collective 2/3rds share of $4,000,000 million additional consideration payable out of future production of the acquired oil and gas interests. The settlement also provides for the return of the 1,333,333 shares of the Company’s common stock issued to Mark Jaehne and Bennie Jaehne, which will be based upon and coincident with the settlement agreement payment schedule of the up front and scheduled payments of the $4,000,000 Merger Agreement consideration. The Company will not be obligated to pay any additional amounts for the repurchase of these shares of common stock. In addition, certain title curative instruments to be filed of public record will cure title disputes between the parties that had been asserted in the lawsuits.
In addition to resolving claims arising under the Merger Agreement, the settlement agreement fully and finally resolves all disputes between South Texas Oil Company and Leexus Oil & Gas, LLP, arising outside of the scope of the Merger Agreement with respect to operations performed on the properties acquired in the Merger Agreement. The settlement agreement does not involve the repurchase of an additional 666,666 shares of our common stock issued to William Zeltwanger, who was another selling shareholder under the Merger Agreement nor the acceleration of Mr. Zeltwanger’s proportionate 1/3 share of the $4 million additional consideration provided under the Merger Agreement, which obligation will remain payable under the applicable terms and conditions of the Merger Agreement. Neither South Texas Oil Company nor Mr. Zeltwanger asserted any claims against each other in the lawsuits, and Mr. Zeltwanger remains as the Company’s Vice President, as well as the owner of 666,666 shares issued to him as the third of the three selling shareholders under the Merger Agreement.
About South Texas Oil Company
Austin-based South Texas Oil Company acquires, explores and exploits predominantly oil-bearing formations in its core operating areas in south-central and southwest Texas, and in the DJ Basin of northeast Colorado. The Company has a high-working-interest inventory of drillable locations within its operating areas. The Company anticipates investing growth capital in both its Texas assets as well as its DJ Basin properties in Colorado. Two Company-owned rigs will be utilized to help develop the Company’s successful Bastrop core operating area as well as other assets in the South Texas portfolio. The Company currently is evaluating existing wellbores in the Giddings Field for re-entry possibilities that can enhance production and estimated ultimate recoveries. The Company is also evaluating infill drilling locations in Kyote and Bigfoot Fields.
Certain statements made in this press release contain forward-looking statements that involve a number of risks and uncertainties. This forward-looking information is based on certain assumptions, including, among others, presently known physical data concerning size and character of reservoirs and economic recoverability. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, operations involve numerous risks and uncertainties, many of which are beyond South Texas Oil’s control, which could result in expectations not being realized or otherwise materially affect the financial condition, results of operation and cash flows. Additional information regarding these and other risks are contained in South Texas Oil’s filings with the Securities and Exchange Commission.
South Texas Oil Company
CONTACT: J. Scott Zimmerman, President and CEO of South Texas OilCompany, +1-512-772-2474, fax, +1-512-263-5046
Web site: http://www.southtexasoil.com/