Equal declared that the pending arbitration with Petroflow respecting termination of its Farmout agreement between the parties has been resolved, and the parties have agreed, consistent with the position Equal advocated in the arbitration, that the Farmout agreement was terminated prior to the entry of Petroflow and its subsidiaries into Chapter 11 bankruptcy protection. The termination is subject to the formality of approvals from the arbitration panel and the Bankruptcy court.

Equal has until now been prevented from pursuing drilling its Hunton resource play acreage by a bankruptcy court imposed stay of operations. Equal intends to immediately recommence its drilling program on the Hunton acreage that was abruptly halted in July, 2010 by the action of the court.

Don Klapko said, "We are extremely pleased to have this major impediment to our company's growth objectives removed once and for all. It has been frustrating to say the least, to have had to wait for a sensible resolution of this issue. Our Hunton play is a strong performer, generating solid returns and growth from this extensive liquids rich natural gas resource play. This relief also frees us up to investigate the intriguing Mississippian oil play advanced by others in the midst of our Hunton acreage."

Equal will recommence its planned drilling program of 4 to 6 Hunton wells as soon as suitable drilling equipment can be mobilized, likely within the next two months. The potential initiation of an exploratory Mississippian oil test will be dependent on the completion of geological mapping currently underway and also on the results of nearby competitor drilling.

There are still two disputes between Equal and Petroflow and its bankers that relate solely to monetary matters and a claim for partial ownership of water disposal facilities that are used to exploit the Hunton play. Equal is defending a claim over access, ownership and fees for the use of Equal's water disposal facilities. Another action relates to the validity and priority of Equal's liens on Petroflow's assets that were established after Petroflow failed to make payments that were due to Equal as operator, for both joint interest operating expenses and for water disposal fees. Resolution of these matters does not relate in any way to Equal's ownership of its producing reserves or its ability to exploit its undeveloped land.

In all the matters relating to the Petroflow bankruptcy disputes, Equal has been represented by the Dallas-based counsel of Fulbright & Jaworski.

Tags: Equal Energy