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Delaware Basin Acreage Option Not To Be Exercised

Stocks in this article: EGN

Energen Corporation (NYSE: EGN) today announced that it does not expect BHP Billiton to exercise its option to purchase a 50 percent undivided interest in 51,720 net acres in the Delaware Basin under lease to Energen Resources Corporation, the company’s oil and gas exploration and production subsidiary. The determination came after the companies were unable to agree on terms for modifying the agreement. According to the definitive agreement signed in February 2012, BHP Billiton had to exercise its option to purchase no later than May 1, 2012.

A conference call to discuss the Energen/BHP exercise option will be held Wednesday, May 2, 2012, at 8:30 a.m. EDT. Members of the investment community may participate by calling 1-866-821-5457. The call may be accessed live and for replay at the Company’s Web site: .

In February, BHP Billiton purchased from Energen Resources three wells drilled in Reeves County, Texas, for approximately $18 million and agreed to carry the Permian Basin driller in the horizontal completion of two of the wells. BHP Billiton earned a 50 percent undivided interest in 4,829 net acres associated with the three purchased wells after beginning completion of two of them.

“The economic potential of these two wells will play a role in helping us determine how best to proceed with the exploration of our Delaware Basin acreage west of the Pecos River,” said James McManus, Energen’s chairman and chief executive officer. Definitive production data is not yet available, and production tubing currently is being installed in the two horizontal Wolfcamp shale wells that have been completed.

“The northernmost well, the State C-19-15 #2H, is the better early performer and has the higher oil content,” McManus said. “Before we shut-in the well for tubing installation, it had a flow-back rate of 600-650 barrels of oil equivalents per day, of which approximately 60 percent was oil.

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