HOUSTON, Sept. 21 /PRNewswire-FirstCall/ -- Blast Energy Services (BULLETIN BOARD: BESV) , through its wholly owned subsidiary Eagle Domestic Drilling Operations LLC ("Eagle"), has terminated its two IADC* day-work drilling contracts with Hallwood Petroleum ("Hallwood") due to breach of contract and non-payment by Hallwood. Blast has provided three business days notice of termination as required under the contracts and also plans to file suit in Oklahoma alleging breach of contract by Hallwood, among other claims.
"We will defend our rights under the IADC* contracts because we expect our customers to live up to their contractual obligations," said David M. Adams President & Co-CEO of Blast Energy Services, Inc. "We are in a period of very short supply of conventional drilling rigs in our industry and anticipate putting these rigs back to work as soon as possible."
On August 25, 2006, Blast was assigned five IADC* drilling service contracts with the acquisition of Eagle. Hallwood had accepted the drilling capabilities of the two rigs and commenced drilling operations with them in February and June of this year. Blast is also having discussions with its second drilling customer with respect to their expectations under the contracts for three drilling rigs. Blast has begun to market those three rigs to potential customers on a best efforts basis.
When Blast acquired Eagle, it acquired three rigs operating under contract; two rigs nearing final construction; and one rig to be built in the fourth quarter. Five of the six rigs acquired were under term contracts all of which had substantially the same major terms and conditions. Termination provisions call for reimbursement of revenues on the basis of $18,500 per day for the full remaining term for three of the contracts and reimbursement of 540 days of operation for two of the contracts if terminated prior to commencement. This calculates to potential liquidated damages of approximately $10 million per rig, assuming the damages are paid in full over the term of the contract. The Eagle rigs have all recently been refurbished or are being built with new drilling components, including motors, pumps and electrical generators and are designed to mechanically drill wells to a minimum depth of 10,000 to 12,000 feet.
Blast is actively marketing its drilling rigs and has three rigs ready to contract today. Management expects at this time that the three additional rigs under construction will be ready for delivery during the upcoming months of October, November and January respectively. Accordingly, Blast management reaffirms its projection that Eagle would be capable of generating annual 2007 revenues of $39 million with an annual EBITDA of approximately $19 million, assuming the rigs are operational under new contracts. With the acquisition, Blast management expects the Company to be both profitable and cash flow positive during 2007. As reported earlier, management further expects the acquisition to be accretive to both earnings per share and cash flow per share. Shares outstanding at Blast are currently 67 million. Blast also reported in a recent 8-K filing that its Pro-forma Balance Sheet at June 30, 2007 included $36 million of shareholders equity and $74 million of total assets.
*IADC is the abbreviation for the International Association of Drilling Contractors.
About Blast Energy Services, Inc.
Blast Energy Services, Inc. is a publicly traded company based in Houston. Our mission is to substantially improve the economics of existing oil and gas operations through the application of our worldwide licensed and proprietary technologies. Our new major business, effective August 2006, is conventional land rig drilling onshore USA with its own fleet of drill rigs and crews. Using specially fabricated mobile drilling rigs we intend to operate a commercially viable energy service business, including: specialty casing cutting, perforation, fracturing services and lateral drilling with the potential to penetrate through well casing and into reservoir formations to stimulate oil and gas production. This service should provide oil and gas producers with an attractive, lower cost alternative to existing well stimulation or horizontal drilling services. Additionally, we are providing satellite services to oil and gas producers. This service allows them to monitor and control well head, pipeline or drilling operations through low- cost broadband data and voice services from remote operations where conventional land based communication networks do not exist or are too costly to install. Please visit our website: http://www.blastenergyservices.com/ .
Safe Harbor Statement
Any statements made in this news release other than those of historical fact, about an action, event or development, are forward looking statements. Forward looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to be materially different from any future performance that may be suggested in this release. Such factors may include risk factors including but not limited to: the ability to integrate and successfully operate the newly acquired company, the ability to raise necessary capital to fund growth, adequate liquidity to manage operations and debt obligations, the introduction of new services, commercial acceptance and viability of new services, fluctuations in customer demand and commitments, pricing and competition, reliance upon lenders, contractors and vendors, the ability of Blast Energy Services' customers to pay for our services, together with such other risk factors as may be included in the Company's filings on Form SB-2 and its periodic filings on Form 10-KSB, 10-QSB, and other current reports.
