Velocity Energy Inc., Houston, (OTCBB: VCYE) has acquired interests in gas wells in West Virginia from privately held, Kentucky-based Classic Oil & Gas Resources Inc. for $1.2 million.
Velocity paid half at closing, and will pay the remainder on the one-year anniversary of closing.
The assets include approximately 13,500 net acres of partially developed oil and gas leases with 91 gas wells in the Ravencliff, Maxton, Big Lime, Berea, Gordon and the Cleveland and Huron members of the Devonian shale.
Velocity and Classic also entered into a farmout agreement granting Velocity rights to develop and operate 60 drilling areas. In addition, Velocity will also have the right to participate with Classic and other working interest owners in over 40 additional wells under a joint operating agreement.
Production is approximately 2 million cubic feet of gas per day commingled from several producing zones. Proved reserves as of July 1 were 35 billion cubic feet of gas (10 billion net).
Velocity president Don Vandenberg says, “We have been pursuing this acquisition and other Appalachian acquisitions as we believe that the long history of successful exploitation of Devonian shale and other shale horizons (Marcellus, Rhienstreet and Java) found throughout the region in Appalachia is the best place to position the company, as a profitable aggregator, of long-lived oil and gas reserves. In addition, our developmental drilling program will give the company the added benefit of the increased opportunity to utilize our drilling rigs.”
In connection with the closing of the deal, Velocity and its subsidiaries entered into an amendment to the security agreement with Summerline Asset Management LLC that the company and its subsidiaries entered on Nov. 13 with the secured party. Additionally, Velocity granted an aggregate 3% overriding royalty interest in and to the interests acquired from Classic to Longview Marquis Master Fund LP (2.3948%) and Summerview Marquis Fund LP (0.6052%).