Petroflow Energy has sold its Permian Basin properties located in Texas. The Texas Properties consist of 3640 gross and net developed acres. Petroflow had a 100% working interest in 14 producing oil wells on the Texas Properties that produced about 65 BOEs (390 McfGEs) per day of production. The sale had an effective date of December 1, 2009. Petroflow will use the gross cash proceeds of $US 3.3 million from the sale to reduce its outstanding indebtedness under its Amended and Restated Credit Agreement (the "Credit Agreement").

"The Texas Properties were substantially developed and it was an appropriate time to monetize this asset. With the completion of the sale, we will be able to further concentrate our capital and attention on the continuation of our successful operations in the Hunton dewatering resource play" stated Sandy Andrew, President and COO.

In connection with obtaining the necessary consent to such sale from the banks under the Credit Agreement and as a result of the occurrence of certain previously reported and continuing Events of Defaults under the Credit Agreement, the Company entered into an Amendment to its Credit Agreement (the "Amendment").

The Amendment requires that the gross proceeds (less certain expenses) from the sale of the Texas Properties be paid directly to the banks to be applied against the outstanding loan balance and permanently reduce the Company's borrowing base by such amount. Although the banks did not agree to waive any of the continuing Events of Defaults under the Credit Agreement, the banks elected to defer their right to raise the interest rates to the default rate and exercise certain remedies available to them under the Credit Agreement. The banks reserved their right to cease such deferrals with or without cause at any time without notice to the Company. The Amendment also requires that the Company provide additional security to the banks in the form of a pledge and first priority security interest in all of the capital stock of its subsidiaries.

Mr. Andrew added, "We are pleased we are able to take this first step to begin to deleverage the Company and we appreciate that our banks continue to work with us during this period of challenging commodity markets."

Tags: Petroflow Energy