Southern Bay Energy, LLC Acquires the Oil & Gas Assets of AROC Inc

Business Wire, Jan 21, 2005

HOUSTON -- Southern Bay Energy, LLC ("Southern Bay" or the "Company") announced today it has acquired all of the oil and gas assets of AROC Inc. for approximately $9.7 million. These properties are located principally in South Texas, South Louisiana and the Permian Basin. The acquisition also includes the general partner interest in AROC Energy, L.P., which is an oil and gas partnership that was formed in 2003 to monetize the bulk of AROC assets. Southern Bay will manage the partnership and operate the majority of partnership and other acquired properties. The purchase was financed by Southern Bay's equity partners and borrowings from the Company's bank credit facility. Southern Bay was advised by Mitchell Energy Advisors, LLC in this transaction.

Frank A. Lodzinski, president, stated, "This acquisition adds significant assets to our platform and positions us for future growth in our key focus areas which include South Louisiana, Gulf Coast and South Texas and the Permian Basin. We will develop these assets to their fullest potential and are actively soliciting additional corporate and asset acquisitions and drilling opportunities."

Southern Bay and its affiliates, Southern Bay Operating, LLC and Southern Bay Oil & Gas, LP, were formed and capitalized by Frank A. Lodzinski, members of management and private investors in September 2004. The entities were initially capitalized with existing oil and gas producing properties and equity commitments totaling more than $30.0 million. Members of management include officers and staff of prior successful entities, including Texoil Inc. and AROC Inc., who have closed profitable corporate and asset sales of over $250 million.

As in prior entities, the Company will maintain a dedication to superior investor returns, a strong balance sheet, constant access to cost-effective capital and a low operating and corporate cost structure. Management will continue to pursue acquisition, development and exploration activities, principally in Texas and Louisiana and will shift its capital expenditures between acquisitions and drilling, depending on market conditions.