Coastal Holdings has decided to purchase the oil well designated as NO. 3 HINES rather than NO. 2 HONEY that appeared in the original MOU and first draft of the Purchase Agreement with BDT. Due to its location adjacent to BDT-owned and producing wells at NO.1 HINES and NO. 2 HINES, the purchase of this oil well is a lower risk venture while still offering Coastal Holdings high revenue and profit potential in a well which could last for 30 years or more. This well will be drilled into the Salem Limestone at a depth of 3350 feet and will be only 660 feet east of an old TEXAS Oil Company (TEXACO) well which produced 55 barrels of oil per day (BOPD) and no water from the Rosiclare limestone. This new well will also be 660 feet west of NO. 2 HINES which has sold in excess of $175,000 in oil produced from the Rosiclare limestone, from just one (1) of the 7 pay zones present in this well. As there are a number of pay zones that produce oil in the immediate area, this well will be drilled to test a total of 8 pay zones for oil and gas production.
The financial terms and tax advantages of this investment are very favorable for Coastal Holdings. First of all, this investment can be completely written off by Coastal Holdings in the year of investment and save the Company approximately $200,000 in Federal Income tax.
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