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QBC-March Should be BIG Month:

Drilling Credits and arbitration outcome on the $18 million in unexpended drilling credits.

On May 18, 2011, EXCO and BG informed the Company that they do not intend to honor the balance of the Drilling Credits, which was approximately $18 million at that time. The Company believes that there is no valid basis to dispute the remaining balance of the Drilling Credits. The dispute was submitted to binding arbitration the week of January 9, 2012 and a ruling is expected during March, 2012. The Company intends to continue to vigorously defend its rights to the remaining balance of the Drilling Credits. If the Company is not successful in defending its rights, it expects to fund its share of expenses from wells drilled by EXCO and BG through one of the other sources of funds described above.

Management believes we will prevail, but if not, we have the option of going "non-consent", or being deemed non-consent, on current and future horizontal Haynesville Shale wells operated by EXCO and BG. By being deemed to be non-consent, in addition to penalties, we would reduce our share of revenues from these wells and would be required to pay the royalty owners their share of revenues, which we anticipate to be up to approximately $65,000 per well per month, or an aggregate of approximately $590,000 for the balance of fiscal 2012, based on the current number of EXCO and BG operated wells. Other than this $590,000, we do not expect any additional royalties to be paid out of pocket by Cubic during fiscal 2012, with respect to EXCO and BG operated wells. With future strategies to obtain additional financing, funds generated through existing wells and cash on hand, we expect to be able to continue to pay our expenses as they come due. It is possible that EXCO and BG could exhaust the remaining balance of the Drilling Credits during fiscal 2012. The balance of the Drilling Credits not exhausted is due and payable to us in cash early in fiscal 2013. Included in results of operations for the six months ended December 31, 2011, were revenues of $1,702,590 and costs of $132,699 related to these disputed properties.

Form 10-Q for CUBIC ENERGY INC

14-Feb-2012

Quarterly Report

http://biz.yahoo.com/e/120214/qbc10-q.html