Underground Bolts On 44,172 California Acres
The assets include 44,172 gross acres with three producing wells in Santa Maria Basin and four trends in San Joaquin Basin, gaining 60 BOE/d, 6.1 MMBOE 2P.
Underground Energy Inc., a subsidiary of Underground Energy Corp., Santa Barbara, Ca. (Toronto Venture: UGE) plans to acquire oil and gas leases in California from an undisclosed seller for US$5.5 million in cash and assumed debt.
The deal consists of $4.6 million in cash and $0.9 million in assumed liabilities.
The assets include 44,172 gross acres (33,037 net) with three producing wells (two oil), a number of drill-ready locations and multiple exploitation and exploration prospects in two trends in the Santa Maria Basin and four trends in the San Joaquin Basin. The lands are primarily prospective for Monterey and other analogous oil-prone shale plays.
The Santa Maria Basin assets are comprised of Zaca Field Extension and adjacent exploratory prospects and the Santa Rita prospects. Through the acquisition, Underground is gaining an 80% working interest and operatorship in these areas with the Monterey shale being the primary target.
The Zaca Field Extension is comprised of 7,750 acres (6,200 net) and includes the eastern extension of Zaca oil field. The Zaca Field Extension includes one producing well (up to 20 barrels per day) and Underground management estimates that there is the potential for an additional 20 to 30 drilling locations on this extension.
The Company intends to reprocess existing 2D seismic on the Zaca assets in advance of drilling its initial step-out extension well late in the fourth quarter of 2011 or early in the first quarter of 2012 and the Company will also look to increase production from the existing well through stimulation work.
The nearby Santa Rita Prospects comprise 1,218 acres (974 net) and are on trend with the Lompoc field, which has produced more than 50 million barrels of oil. The Company intends to conduct additional geological and geophysical evaluation at Santa Rita prior to applying for drilling permits.
Production is approximately 60 barrels of oil equivalent per day. Proved and probable reserves are 6.1 million barrels equivalent, according to company management's best estimate, with an additional 4.75 million barrels of possible reserves net to Underground.
Underground president and chief executive Michael Kobler says, “This agreement allows us to dramatically increase our land position in California from 7,314 net acres previously to 40,350 net acres post acquisition while providing us with assets that can be evaluated through a flexible capital expenditure program.”
He adds the acquisition allows the company to maintain strategic focus on the Monterey shale, where pro forma Underground will hold 27,380 net acres prospective for oil in the Monterey.
The deal is expected to close on Nov. 15.