Cubic Energy Inc., (OTCBB: QBIK)

Dear Reader,

Sometimes it’s simple.  Sometimes it doesn’t take a world of explanation to make obvious what should already be clear.  Sometimes the answer is right next door.

And so it is for today’s installment of the StockUpTicks Newsletter.  You see, dear reader, our latest offering of under-followed public companies presents an enigma.  Our subject company, Cubic Energy, Inc. (OTCBB: QBIK) is an independent oil and gas company, which we all know is a hot sector given the sky-high prices we're all paying at the pump.  But what is perhaps most compelling about Cubic is its neighbors. Yes, it’s neighbors.

That may sound peculiar in the context of a public company as it probably won’t matter to Microsoft who moves in down the road nor to Coca-Cola who operates across the way.  But in the oil and gas industry it is indeed important to note that Cubic’s oil fields are virtually surrounded by some of the top producing names in the business, companies with long track records that are spending tons of development dollars in the very same dirt that Cubic is exploring.  That bodes well for Cubic, today’s featured company.

There are many phases in the life of a successful company.  The start-up, getting listed, increasing shareholder value, increasing prominence and market share.  An important milestone at any company occurs when it steadily progresses without failure, builds a solid operating model, and then takes advantage of a great opportunity when its presented.  That's the Cubic story.  Having been offered a significant oil "play," Cubic's seasoned management team seized the opportunity in East Texas and Northern Louisiana and brought the company for the first time into the peer group of such notable neighbors as Chevron and British Petroleum America.  As its production revenues climb during 2005, Cubic is poised to continue its success and capitalize on the opportunities ahead. 
 

About Cubic Energy Inc.

Cubic Energy, Inc. (OTCBB: QBIK) is an independent energy company engaged in the oil and gas industry with a well-established and highly-experienced management team.  The Company explores, develops and produces crude oil and natural gas with assets and properties located mainly in Texas, Oklahoma and Louisiana. 

Cubic has a key relationship and shares management with Tauren Exploration, a 16-year-old private company that operates in Texas, Louisiana, and New Mexico.  Tauren is in large part a prospect house and has identified the Bethany Longstreet project for Cubic Energy as well as many other companies.  Tauren is proving to be a tremendous asset to Cubic in identifying prospects. The majority of the risk typically associated with wildcat exploration is removed as a result of Cubic's relationship with Tauren. 
 

The Play At The Bethany Longstreet Field

The Bethany Longstreet Field is located Northern Louisiana. The field was discovered in 1951 and has produced approximately 400,000,000 mcf of gas, 5.7 million bbls of  oil and 9.64 million bbls of water.  The field is a combination of reservoirs that stretch into East Texas such as the Glen Rose Reservoir, Paluxy, Rodessa, Pettet, and upper Hosston Sands. 

Major exploration and production players are already heavily involved in and around Cubic's acreage play in the East Texas to Northern Louisiana basin.  The players range from El Paso (NYSE: EP) to XTO (NYSE: XTO) and Goodrich Petroleum (NYSE: GDP), all of which literally surround Cubic's acreage position.  The prolific Cotton Valley Sands formation, along with many other pay zones, exists throughout the Bethany Longstreet Field.  The closest comparable to the Bethany Longstreet Field is the Holly Field developed in 1977.   This field currently produces over 30 million mcfgd.  Companies operating to the west include BP America and Chevron and companies operating to the east include Questar and Camterra. 

(Excerpt) Oct. 12 2004  PRNewswire-FirstCall – Goodrich Petroleum Corporation (NYSE: GDP) “The Company continues to project that it will drill a total of fourteen to fifteen (14-15) Cotton Valley wells on its approximate 40,000 acre block by the end of the year.  All of the eight wells drilled to date have been successfully completed for a 100% success rate.”  Goodrich recently increased the capex budget from $25 million to $45 million with two thirds of the increase being directed to the cotton valley trend where they will now drill 40 wells.

Cubic Energy's Play At The Bethany Longstreet Field

QBIK acquired a 25% working interest in 8 sections or 5,120 acres in the Bethany Longstreet play from Tauren Exploration.  Based on conservative reserve estimates, there are 240 billion cubic feet (Bcfe) of gas in the 8 sections in which Cubic has a working interest.  The first well has an estimated 10.9 Bcfe in reserves.  The daily production was tested 1.5 Mcfe or $10,500 a day in revenue using 7 dollar gas.  Cubic plans to drill 8 wells during 2005.  Eight wells with an average of 8 Bcfe per well will add 64 Bcfe, which nets 16 Bcfe to Cubic in 2005 alone!  Even on very conservative basis, this should add DAILY production revenue of $21,000 or $7.6 million in annual revenue.
 
 

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Recent News From Cubic Energy

Press Release Source: Cubic Energy, Inc. 
Monday November 22, 1:03 pm ET 

DALLAS, Nov. 22, 2004 (PRIMEZONE) -- Cubic Energy, Inc. (OTC BB:QBIK.OB - News) announced today that it has spud its Moseley 25 No. 1 well in De Soto Parish, Louisiana, which is part of its newly acquired North Louisiana Project. The Moseley 25 No. 1 is anticipated to drill to a total depth of 10,800 feet, targeting both the Cotton Valley and Hosston Formations. The Moseley well is an offset to the successful Kraemer 24 No. 1 well. Cubic Energy, Inc.'s working interest in this project is 25%. Current plans call for the well to reach total depth before the end of the year.

Cubic Energy, Inc. also announced that it has closed the acquisition of a 25% interest in the Kraemer 24 No. 1 from investors in the Caravel Energy Fund 2003 - II.  This transaction has an effective date of November 22, 2004, and will result in the issuance of 2,000,000 shares of Cubic Energy, Inc. common stock.

"The acquisition of a 25% interest in the Kraemer 24 No. 1 well, along with the same interest in this exciting project is a material event for Cubic Energy.  The spudding of the 2nd well in this field represents a period of what we believe could be rapid expansion. We anticipate spudding the 3rd well in the field upon completion of the Moseley 25 No. 1 well.''

DALLAS, Oct. 6, 2004 (PRIMEZONE) -- Cubic Energy, Inc. (OTC BB:QBIK.OB - News) announced today that it has closed financing for $2.575 million and entered into a letter of intent to acquire a 25% interest in the Kraemer 24 number 1 well located in the Bethany-Longstreet play of Northern Louisiana.

The Company issued $2,575,000 worth of Senior Secured Convertible Notes to a group of institutional and high net worth investors. These notes pay an annual interest rate of 7% and can convert into common stock at a price of $0.50 per share. These investors also received five year stock purchase warrants to purchase an additional 2,575,000 shares of common stock at a price of $1.00 per share. Proceeds from this placement will be put immediately to work in further development of the Bethany-Longstreet play, including spudding two additional wells before the end of the year. C. K. Cooper & Company of Irvine, California served as Placement Agent on this transaction.

Concurrently with the financing, the Company also entered into a letter of intent to acquire a 25% interest in the Bethany-Longstreet play through a combination of cash and stock. The Company intends to issue up to 2,000,000 shares of common stock to acquire a 25% interest in the existing Kraemer 24 number 1 well from Caravel Resources 2003-II LP. Furthermore, Cubic will pay $1,080,000 in cash for a 25% interest in the remaining leasehold covering 8 sections in the play. The acquisition of the Kraemer 24 number 1 interest from Caravel Resources 2003-II, LP is scheduled to close in 10 days.

Recent Industry Coverage Of Cubic Energy

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For the three news and analysis articles at Rigzone, just type Cubic Energy in the search field.

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The Cubic Energy Management Team

Calvin A. Wallen III - is the President, CEO and Chairman of the Board of Cubic Energy. Mr. Wallen has over 20 years of experience in the oil and gas industry working as a drilling and petroleum engineer.  He was employed by Superior Oil and various other drilling contractors including Resource, Tom Brown and Rowan International.  He assisted in the design and construction of several land rigs with advanced drilling systems and has domestic and international experience in drilling engineering.  While employed by Rowan International, Mr. Wallen gained experience in drilling high angle directional wells at Prudhoe Bay on contract to Arco.  In 1982, Mr. Wallen began acquiring and developing oil and gas properties, forming a production company that has evolved into Tauren Exploration, Inc. Mr. Wallen attended Texas A&M University at College Station, Texas.

Gene Howard - is the Senior Partner of the law firm of Howard, Widdows & Bufogle, P.C. of Tulsa, Oklahoma and has been engaged primarily in the private practice of law over the past thirty-five years. Mr. Howard served as Director of EntreCap and Hinderliter Corporations from 1991 to August of 1992. He is also Chairman of the Board of Philadelphia Mortgage Trust ("PMT").

Jon S. Ross - has served as the Secretary and as a director of Cubic Energy since April 1998. Mr. Ross is a practicing attorney in Dallas, Texas specializing in the presentation of over fifty corporate entities within the past eight years. Mr. Ross graduated from St. Mark's School of Texas with honors in 1982 and graduated from the University of Texas at Austin in 1986 with a B.B.A. in Accounting.  He then graduated from the University of Texas School of Law in 1989 attaining a Juris Doctorate degree.

Herbert A. Bayer - has served as a director of Cubic Energy since May of 2003.  Mr. Bayer is uniquely positioned to help in the growth of the company and increase shareholder value.  His career over the last 20 years has lead him to be the top salesman for Itron.  He has worked with Investor-Owned utilities, Government Run Municipalities and Electric Cooperatives.

Bob L. Clements - is the owner of both Leon’s Texas Cuisine, the largest independent producer of corn dogs and stuffed jalapenos for the retail and food service industry and the Shoreline Restaurant Corporation, which has produced two of the finest upscale dining locations in Rockwall, Texas.  He has been in the restaurant and wholesale food business for more than thirty years.  Mr. Clements received his education from Rutherford Business College.  He also studied three summers at Harvard Business School in the highly selective OPM Program, graduating in 1985. 

Alexander Montano - is the Managing Director of the Oil & Gas Group at C.K. Cooper & Company, a full service investment banking and brokerage firm.  In this capacity, Mr. Montano has been involved in the financing of numerous smaller exploration and production companies and providing value added strategic advice.  In 2003, when Mr. Montano was an oil and gas equity analyst, he was named in the Wall Street Journal's "Best On The Street" as the top analyst, and was further recognized by Starmine Research as ranking 2nd in the nation for analysts that follow under-followed stocks.  Mr. Montano is very active in the oil and gas industry as a member of IPAA and a frequent speaker at industry conferences.  He joined the Board at QBIK's 2004 shareholder meeting. 

Financial Highlights For Cubic Energy Inc.

Industry: Energy Recent Trade: $1.01 (as of 01/05/05)  52wk Range: $0.25 - $1.20  Avg Vol (3m): 22,998 Fiscal Year End: 06-30 Transfer Agent: Securities Transfer Corporation Outstanding Shares 31,451,824 (as of 10/30/04)  Estimated Market Cap: $31.766M

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12-Nov-2004 Quarterly Report ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS  Gross Revenues for the three months ended September 30, 2004 increased to $105,263 from $104,422 at September 30, 2003, due to higher natural gas prices and despite decreased gas production.  QBIK FOR THE LAST SIX MONTHS

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