Emerald Signs LOI for Potential New Shale Oil Production Asset Acquisitions
To acquire approximately 9,000 net acres with Bakken and Three Forks oil production in ND & MT.
Emerald Oil & Gas NL (ASX: EMR, EMRO) is pleased to advise that the Company has signed a non-binding Letter of Intent (LOI) with a private US company to acquire approximately 9000+ net lease acres with production, reserves and an active nonoperated development drilling program in the Williston Basin Bakken/Three Forks shale oil play, located in North Dakota and Montana, USA. Any potential transactions would be subject to negotiating and executing purchase and sale agreements and securing funding from private capital markets through Emerald’s wholly owned US subsidiary, Emerald Oil & Gas USA Holdings Inc. Discussions are ongoing regarding specific terms and further information will be provided as appropriate. Upon successful completion, aggregate financing, inclusive of a component for refinancing, would be approximately $US150 million.
Subject to execution of purchase and sale agreements and funding arrangements, this transaction would be Emerald's largest dealing to date as part of its US oil shale growth strategy and would provide the Company with immediate access to substantial oil production and cash flow. These acquisitions would be the third group of US shale transactions by the Company, following its recent Williston Basin acquisition of 10,500 net acres in Dunn County, North Dakota for $US11.85 million, as announced on 22 February, 2012 and the acquisition of its Green River Basin assets in May 2011. Other US oil shale acquisition opportunities are also currently being considered. The new potential acquisitions would significantly expand Emerald's acreage holding in the Williston Basin Bakken/Three Forks shale oil play and are complimentary to its Williston Basin Bakken/Three Forks position in Dunn County, ND, where planning is now underway to commence an operated Bakken/Three Forks drilling program in late 2012 or early 2013.
Emerald Operated Bakken/Three Forks Drilling Program in Dunn County Emerald's US subsidiary is now in the process of building the necessary internal operating capability to successfully run a single rig continuous drilling program commencing around end 2012 or early 2013. The Company intends to leverage its
Transition Services agreement with North Plains Energy, under which North Plains will provide operating support during 2012, up to and including contract drilling of initial wells on behalf of Emerald, if appropriate. Emerald holds interests in 45 drilling spacing units (DSUs) of 1,280 acres in Dunn County and expects to operate approximately 14 DSUs holding approximately 66% of its net acreage. Emerald's working interests in individual DSUs varies between 1.5% and 75% for a total of 8 net DSUs. Each 1,280 ac DSU can potentially be drilled out with up to 4 middle Bakken wells and 3 Three Forks wells per DSU, for a total of 7 development wells per DSU.
The Company's non-operated DSUs in Dunn County are operated by large, experienced US shale operators such as Hunt, Hess, Marathon, Oxy and others. This provides Emerald with the ability to control the drilling program on the majority of its net acreage, while benefiting from the experience of some of the most seasoned operators in Williston Basin.
Significant Progress on US Shale Strategy'
Emeralds US Shale strategy, initially announced in October, 2011, involves growing EMR shareholder value by establishing its wholly owned US subsidiary as an active US oil shale company, selectively pursuing value accretive oil shale acquisitions and accessing US capital markets to fund these acquisitions and related drilling programs. Emerald Directors are particularly pleased with the rapid progress being made on both the transformation of Emerald's US subsidiary into to an active, operating, US shale company and the quality of the acquisition opportunities, both of which represent significant milestones in the Company's growth strategy, consistent with internal planning timetables.