2011-02-25-2011-01-27

To buy certain 77.5% WI in Hospah Field in McKinley County, gaining 100 BOE/d.

Houston-based Lucas Energy Inc. (NYSE Amex: LEI) plans to buy certain oil and gas rights in New Mexico from an undisclosed seller for $20.5 million. Lucas funded the purchase of an undivided 7.56% interest in the property for $2 million, and plans to purchase the balance of the interests, subject to funding.

The acquisition involves up to a 77.5% interest in and operatorship of Hospah Field, which includes six shallow producing units and more than 100 existing well bores drilled to the Hospah oil and Dakota gas formations in McKinley County.

Production averaged approximately 100 barrels per day of light sweet crude during 2010. Management believes that daily production can be increased to 500 barrels of oil and 2 million cubic feet of gas in the first year at a capital cost under $9 million.

"Strategically, this acquisition fits our business model of reworking old fields and plays to our core strengths," says William A. Sawyer, president and CEO of Lucas Energy. "It also diversifies our asset base out of Texas."

Remaining items to close the balance of the acquisition include the completion of due diligence, title opinions, additional financing, and board approvals. The acquisition and development plans are expected to be financed through joint venture partners or a structured investment at the asset level.