13/08/2008 - 09:16

Emerald pays $2m for Kentucky gas wells

13/08/2008 - 09:16

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West Perth-based Emerald Oil & Gas NL has entered into an agreement to acquire a 25 per cent interest in 50 gas wells in the United States for $2 million.

Emerald pays $2m for Kentucky gas wells

West Perth-based Emerald Oil & Gas NL has entered into an agreement to acquire a 25 per cent interest in 50 gas wells in the United States for $2 million.

Emerald has signed a memorandum of understanding with P&J Resources Inc, operator of the Appalachian Gas Development project, over the gas wells, located in Kentucky, that were drilled from 2004 to 2006.

Also under the deal, Emerald will acquire interests in a 35 mile pipeline and plant that connects to the El Paso trunkline.

Emerald has agreed to pay P&J $1.1 million in cash and issue 4.5 million Emerald shares. Due diligence ends later this month.

Emerald said the acquisition will fast track its development program in the Appalachian Gas Development project.

 

Below is the full announcement:

Emerald Oil & Gas NL ("Emerald") is pleased to announce that it has signed an MOU with P&J Resources Inc (P&J), the operator of its Appalachian Gas Development project to acquire a 25% interest in 50 gas wells located in Magoffin County, Kentucky USA.

Highlights

50 wells to be hooked up to new pipeline facilities

Acquisition cost well below current drilling costs

Frac program to enhance production

Includes associated gathering lines and infrastructure

Accelerates development and production profile

APPALACHIAN BASIN GAS DEVELOPMENT PROJECT

(Emerald 80% Working interest, Operator: P&J Resources Inc.)

Emerald has entered into a Memorandum of Understanding with P&J to acquire a 25% interest in 50 wells drilled in Magoffin County Kentucky from 2004 to 2006.

These wells have all produced gas however capacity constraints and lack of infrastructure have curtailed production, with the wells shut in since 2006. P&J is close to completion of a 35 mile 8 inch pipeline that connects to the El Paso trunkline which has excess capacity which will enable hookup to production.

The 50 wells are all vertical Big Six completions, drilled to less than 3,000 feet. Production rates have been between 40 and 80 Mcf per day. It is planned to put the wells on to production then proceed with fracture stimulation to enhance production flow rates. It is envisaged that fracture stimulation will substantially enhance production.

Under the MOU Emerald will also acquire a 25% interest in the 35 mile pipeline and a 50% interest in the Amine plant that have both been recently constructed and are nearing commissioning.

In Wayne County West Virginia, Emerald has entered into an MOU to acquire a 25% interest in the pipeline "tap" and associated equipment connected to the El Paso line. This is a strategic move to ensure that Emerald will always retain access to El Paso's line. Emerald will be entitled to receive a transmission fee for all gas passing through the "tap". In addition Emerald will acquire a 25% interest in P&J's 10 mile 10 inch gathering line in Wayne County West Virginia.

This line provides the only access to El Paso's trunkline for the immediate area, so third party producers will have use of the line for a fee.

Agreement

The total consideration for the acquisitions will be: US$950,000 in cash and 4.5 million Emerald shares. The MOU allows for a due diligence period ending August 30, 2008.

This acquisition will significantly expand Emerald's production and development activities in the Appalachian Basin and will further entrench Emerald's relationship with P&J.

P&J retains a 25% interest in the wells with an unrelated third party retaining the remaining 50%.

The acquisition will fast track Emerald's development program in the Appalachian Gas Development project.

 

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