2010-05-04-2010-05-04-2010-05-04

JV to earn 95% WI in Shelby Co, TX, & 5% in 23,400 acres in Shelby, San Augustine cos.

St. Mary Land & Exploration Co., Denver, (NYSE: SM) has entered into a joint-venture agreement with an undisclosed partner that will develop a portion of its Haynesville shale position in East Texas in a drill-to-earn commitment.

The agreement covers 32,000 net acres involving the Haynesville and Bossier intervals only. The partner will earn 95% of St. Mary's interest in approximately 8,400 net acres in Shelby County and 5% of St. Mary's interest in approximately 23,400 net acres in Shelby and San Augustine counties.

The drilling carry is estimated to be approximately $87 million in drilling and completion costs for horizontal wells planned for the South Block in Shelby and San Augustine counties. St. Mary will be the operator of wells drilled on the South Block.

Once St. Mary has completed the expenditure of the carry amount, the two parties will share all costs on the affected lands according to ownership interests.

St. Mary president and chief executive Tony Best says, "The Haynesville agreement we are announcing today allows St. Mary the opportunity to test a significant portion of its East Texas Haynesville position with minimal capital investment. It also allows us to deploy more capital in the Eagle Ford shale program while not increasing our total capital investment budget for the year."

KeyBanc Capital Markets analyst Jack Aydin estimates St. Mary is receiving approximately $9,508 per acre for 9,150 net acres.

"Clearly, this is below the higher flying prices per acre in the past and below the price recently paid by Exco Resources Inc., Dallas, (NYSE: XCO) for Common Resource's Haynesville position ($15,274 per acre). However, we still view this as a good price in the current natural gas pricing environment and an appropriate move for St. Mary, given that it saves the company capital, accelerates drilling, and provides St. Mary the ability to hold its Haynesville acreage."