Sun River Energy Inc., Dallas, (OTCBB: SNRV) has completed the acquisition of a majority of the operated oil and gas properties of Katy Resources ETX LLC for $5 million in cash and $3.5 million in shares of the company's common stock.
The assets include three producing gas units and four lease prospects in Texas. The leasehold has four existing wellbores, of which three are currently producing. Total acreage held by production is 2,486 gross acres (1,361 net acres). In addition, there are 9,706 gross acres (7,549 net acres) within primary terms on multiple leases. Subsidiary Sun River Operating Inc. will operate the properties.
Sun River Energy estimates total proved reserves of 17 billion cubic feet equivalent (Bcfe) of gas, proved developed producing (PDP) reserves of 1.1 Bcfe, proved developed non-producing (PDNP) reserves of 3.7 Bcfe, and proved undeveloped (PUD) reserves of 12.2 Bcfe. The net present value of future cash flows discounted at 10% from proved reserves is estimated to be $25.3 million. Additionally, 3P reserves are estimated at 89 Bcfe, and total potential resources are estimated at 270 Bcfe. The company estimates there are an aggregate of 253 additional drilling locations in the leasehold assets to be acquired.
The geological pay packages overlaying the leases cover the Woodbine, Pettit, James lime, Travis Peak, Cotton Valley and Haynesville/Bossier formations. Sun River Energy expects the economic ultimate recoveries (EUR) will range from 1.5 Bcfe to 2.5 Bcfe on average, per vertical well.
The acquisition came at a very attractive price of $0.43 per Mcf proved, according to Sun River president and chief executive Donal R. Schmidt, Jr.
When the deal was announced in October 2010, Schmidt said, "This acquisition allows Sun River to begin generating revenue. It also allows us to add proved producing oil and gas assets at a very attractive discounted price. We estimate the cost of acquiring proved reserves in this transaction at less than $0.70 per million cubic feet of gas, which we believe is significantly less than the finding and development costs that would be incurred to replace the reserves."