Houston-based company Lucas Energy Inc received unfortunate news last week as West Texas operator Victory Energy called off any further workings on a potential merger deal.
The Houston Business Journal reported last Friday that Victory ended the nonbinding letter of intent on May 11. Both companies were allowed to end the working agreement for any reason.
The deal would have given Lucas a needed boost in Texas operations in the Eagle Ford Shale. Prior to termination, Lucas anticipated the merger to fund a portfolio of 130 future drilling locations in Eagle Ford. Even with oil prices set at $50 per barrel, both parties expected that the monthly production revenue from these combined wells would have exceeded $1.1 million in revenue.
“While disappointed that we will not be moving forward with the business combination, we have reached out to known parties in an effort to revisit transactions that were abandoned after the oil price collapse last fall or following our Feb. 4, 2015, announcement of the proposed combination,” Anthony Schnur, CEO of Lucas, said in a statement. “We are encouraged about the opportunities available to us now that crude oil prices have stabilized and drilling costs have been declining.”
Lucas has experienced some bad times as of late. In February, the company announced that it had defaulted on a debt payment dating back to December 13 of last year. Lucas is now required through contract to pay a defaulted interest of 18 percent per year on the $7.7 million it owes under the loan agreement.