Farmout agreement covers the drilling of up to fifty vertical or horizontal wells inside the Hugoton Gas Field in Haskell and Finney counties, Kansas, with the first exploratory well to be drilled in April 2022
American Noble Gas enters into a farmout agreement to explore and develop natural gas, helium and brine minerals in the Hugoton Gas Field. (Credit: Terry McGraw from Pixabay)
American Noble Gas Inc (OTC-QB: IFNY) (“AMGAS” or the “Company”), an independent oil, gas and noble gas exploration and development company, announced today it has agreed to acquire a 40% participation in a farmout agreement (the “Farmout Agreement”) negotiated with a major, well respected, operator relative to its existing oil and gas and brine interests in the Hugoton Gas Field in Haskell and Finney Counties, Kansas. AMGAS will join with three other partners (collectively the “Hugoton JV and/or the “JV”). to explore for and develop oil and gas and brine reserves on the property covered by the Farmout Agreement.
The Farmout Agreement covers drilling and completion of up to 50 wells, with the first exploratory well scheduled to be spudded in April 2022. The Hugoton JV will utilize existing infrastructure assets, including water disposal, existing brine stream, gas gathering and helium processing, as part of the Farmout Agreement. The Farmout Agreement provides the JV with rights to take in-kind, and market its share of helium. Hugoton JV will be able to market and sell the helium produced, at prevailing market prices, by taking its helium in-kind.
The Hugoton JV also acquired the rights to all brine minerals produced, subject to a ten percent (10%) royalty, across all of Finney and Haskell Counties. Brine minerals are harvested from the formation water produced from active, and to be drilled, oil and gas wells and may include a variety of dissolved minerals, including bromine, iodine and magnesium. The JV and its partners are currently developing proprietary technology with respect to brine mineral recovery which may be an important factor in efficiently harvesting the brine minerals produced under the Farmout Agreement.
The first exploratory well is scheduled to commence in April 2022 near Garden City, Kansas with a goal to evaluate an unconventional theory for reinvigorating production from the Hugoton Gas Field. If the Hugoton JV is successful in proving out this unconventional theory, the Company anticipates that it could result in the unlocking of substantial gas and helium reserves embedded in the Hugoton Gas Field that were previously considered depleted. The Hugoton Gas Field has been a prolific producer of gas and helium for decades. Original down-hole pressures for these other porous and permeable members of the Chase formation in the Hugoton Gas Field were approximately 435 psi in 1930’s, at the time of field discovery, with current pressure in most pay zones now typically ultra-low. This had led the industry to believe that the Hugoton Gas Field is mostly depleted. While this is likely true for the more porous and permeable zones, the Hugoton JV is pursuing a unconventional theory that remaining gas and helium reserves may exist in the other previously unexplored layers which will require targeted stimulation to release. The Hugoton JV and its partners are not aware of any previous attempts to explore its targeted zones vertically or horizontally in the field. If elevated pressure exists, it may suggest that reserves in the field are underdeveloped and underestimated. It may also warrant more significant stimulation treatments using modern designs.
Management commentary:
Stanton E. Ross, Chairman and Chief Executive Officer of AMGAS remarked “The Company couldn’t be more pleased to announce its 40% interest in the Farmout Agreement through the Hugoton JV. The Farmout Agreement provides Hugoton JV with access to explore and develop helium and other noble gases as well as brine minerals in the Hugoton Gas Field. We believe that commercial-level reserves of helium are present in the acreage included in our Farmout Agreement. The Company’s newly appointed advisory board and our service agreement with U.S. Noble Gas, LLC, pairs us with specialists who can provide invaluable help to the Hugoton JV for developing reserves of helium and brine minerals. Helium is a rare noble gas with considerable value relative to natural gas (methane). It is used in many high-value applications such as MRI coolants, space exploration and microchip manufacturing. The world is currently facing a well-publicized shortage of helium and the world needs helium”, added Mr. Ross, “The Hugoton JV will spud its first exploratory well in April 2022 and will test gas that is produced from its test well and report such analysis in updates to follow, further we remain keenly interested in the brine mineral potential”, concluded Mr. Ross.
Source: Company Press Release