USA: Dune Energy, Inc. Anticipates Significant Exploratory Activity in 2011 at Garden Island Bay Field

Dredging operations have commenced at the SL 214 #1, a 19,500 feet subsalt test at Garden Island Bay Field, Plaquemines Parish, Louisiana. Dune will have a 15% working interest in this well before payout and a 26% working interest after payout. Payout is defined as gross 3 MMboe of production. Total unrisked reserve potential for the prospect is 133 MMboe. The well is anticipated to take 80-120 days to drill and test.

Additionally, Dune anticipates spudding the SL 214 #916 in late January or early February, a 14,000 feet test in the north flank of the field above salt. This prospect is one of 17 prospects and approximately 40 separate well locations identified using a recently completed depth migrated 3-D data set within the field. Dune will maintain a 100% working interest in this prospect. Gross reserve exposure for this prospect is 2.8 MMboe and reserve exposure for all 17 prospects is over 28 MMboe. Success on these projects could lead to further exploratory or development drilling later in 2011 within the field.

2011 Budget

The 15% working interest cost on the subsalt well at Garden Island Bay is anticipated to require a net $6 MM investment ($3.8 MM dry hole cost and a $2.4 MM completed cost). The completed well cost on the S prospect is approximately $8 million. We anticipate investing another $9.0 million in various field operations to maintain base production at the 3,000 – 3,300 BOPD level. An additional $19 million could be invested in 2011 depending on early success and available cash flow.

Liquidity

Year-end 2010 available cash was $23.8 million. Additionally, $15.8 million has been reserved for the June 2011 interest payment on the $300 million of Sr. Secured Notes. Cash on hand and anticipated cash flow, assuming a base production of 3,000 – 3,300 BOPD will support planned drilling and interest expenses for 2011.

Capital Structure

In December approximately $19 million face amount of convertible preferred shares were put to the company in exchange for approximately two million additional common shares yielding a current share count of approximately 43 million common shares. Face value of the preferred has been reduced to approximately $195 million. As detailed in a prior press release, the $40 million revolver previously in place has been converted to a $40 million term loan with a maturity of March of 2012 and is currently fully drawn. The Senior Secured Notes have a maturity of June of 2012.

Dune will review the upside with investors at the Pritchard Capital Partners Energize 2011 Conference in San Francisco on January 5th and 6th. The presentation is available on our website at https://www.duneenergy.com under presentations.

James A. Watt, President and Chief Executive Officer of the company stated, “We are extremely excited to be testing the oil potential of our Garden Island Bay field. Success on these wells could fuel significant reserve and production growth for later in 2011 and into 2012.”

[mappress]

Source: prnewswire, January 5, 2011

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