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Subsequent Events
12 Months Ended
Dec. 31, 2012
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 17 – SUBSEQUENT EVENTS

On February 28, 2013, our wholly owned subsidiary, American Shale Development, Inc. amended and restated the credit agreement that was previously entered into on February 29, 2012 by and among American Shale, several banks and other financial institutions or entities that from time-to-time will be parties to the Credit Agreement, and Chambers Energy Management, LP as the administrative agent. The new credit agreement was entered into among the parties in order to facilitate an increase in the principal amount of the borrowings under the facility to $75 million from $50 million. The additional funds were received February 28, 2013.

Trans Energy sold wells and farmed out drilling rights related to its shallow well assets in a transaction that closed on Thursday, January 24, 2013.

Trans Energy sold its working interest in all of its existing shallow wells, but retained an overriding royalty interest of approximately 2.5% on most of the wells. The purchaser assumed the role of operator with respect to approximately 300 wellbores, and intends to commence a workover program with respect to a number of the existing wells. The wells produced at a rate of approximately 800 mcfe per day as of December 31, 2012, which was the effective date for the transaction. As of the December 31, 2011 reserve report, these wells had proven reserves of 2.5 Bcfe.

Additionally, Trans Energy granted the purchaser (the “shallow operator”) the right to drill wells in or above conventional shallow Devonian formations, for leases where Trans Energy currently holds rights to such depths. Trans Energy did not farm out any of its rights to drill in deeper formations such as the Rhinestreet, Marcellus or Utica. Trans Energy retained up to a 5% overriding royalty interest on any such wells drilled, depending on the net revenue interest.

 

Trans Energy retained rights to ensure that production either commences or continues, if necessary to maintain its existing leasehold. Additionally, Trans Energy has the right to participate in up to 20% of any well drilled by the shallow operator, unless the shallow operator fails to fulfill its development commitments, in which case Trans Energy can participate in up to 50% of each well. This participation right can be invoked on any well, and the failure to participate in any well will not impact Trans Energy’s future participation rights.

In order for the buyer to earn acreage on leases that are not currently HBP, the buyer is required to commit to drilling such acreage on a semiannual basis as part of a development program. Trans Energy can choose the drilling locations for these development programs, and the company intends to ensure that the buyer drills shallow wells on certain leases that are not currently HBP and in which Trans Energy’s subsidiary, American Shale Development, retains its rights to drill in deeper prospective formations, including the Marcellus. Both parties have prioritized a list of leases that they intend to convert to HBP status in this manner. These leases represent more than 3,500 acres net to the interest of American Shale Development, which could potentially be converted to HBP status by drilling shallow wells.