27/05/2014 - 10:57

Rinehart-backed oil play eyes shale

27/05/2014 - 10:57

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The Gina Rinehart-backed Sun Resources has purchased a stake in oil and gas leases in the prospective Eagle Ford and Austin Chalk shale formations in the American state of Texas.

Rinehart-backed oil play eyes shale
Iron ore magnate Gina Rinehart.

The Gina Rinehart-backed Sun Resources has purchased a stake in oil and gas leases in the prospective Eagle Ford and Austin Chalk shale formations in the US state of Texas.

Sun told the market today it had entered into a deal to acquire a 50 per cent non-operated working interest in Texas-based Ursa Resources Group's Badger oil project for an undisclosed cash amount.

The project area includes a 10,028-acre package of oil and gas leases adjacent to the Giddings oil field, which has produced more than 1 billion barrels of oil.

Mrs Rinehart's Hancock Prospecting holds a 19.5 per cent stake in Sun and has tipped in at least $15 million to the company over the past 12 months.

Sun is chaired by geologist Ian Plimer, who sits on the board of several companies linked to Mrs Rinehart, including Roy Hill Holdings.

Ursa, a private company backed by private equity group Denham Capital, will retain and operate the remaining 50 per cent stake in the Badger project.

Sun said it would make the purchase using existing cash reserves. The leases have 18 months remaining of their initial three-year term, with additional two-year extension options.

The partners plan to spud the first horizontal fracture stimulated well at the project later this year to test the commercial oil potential of the Eagle Ford and Austin Chalk formations.

Sun managing director Govert van Ek said the acquisition would partner Sun with a proven and well-backed operator.

"In addition to this highly prospective new oil project, the new relationship we have formed with Ursa is strengthening Sun’s regional knowledge and ‘unconventional’ technical and operating expertise,” he said.

Sun shares jumped 20 per cent higher on the deal to 1.8 cents at 10:53am WST.

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