Journey Energy has signed an agreement with strategic joint venture partner Kiwetinohk Resources to develop its East Duvernay shale oil resource prospect in Alberta, Canada.
Image: Journey Energy has upstream operations in Canada. Photo: courtesy of Journey Energy Inc.
Additionally, the partners have increased the amount of contiguous lands in the East Duvernay shale oil resource prospect from approximately 100 sections to approximately 140 sections.
As part of the joint venture arrangement, Journey and Kiwetinohk will undertake a two well ‘Commitment’ phase followed by a five well ‘Option’ phase.
Journey Energy said it will work with Kiwetinohk to formulate the most effective drilling program to delineate the most prospective sections, mitigate land expiries and test potential development concepts.
Under the two well Commitment phase, Kiwetinohk will pay 100% of the capital costs and own 100% stake, before payout of 58.33% of its costs to drill, complete, equip and tie in.
Additionally, Journey will have a 3.75% gross over-riding royalty on the production from the wells prior to payout.
Kiwetinohk, upon payout and conversion of the royalty, will have a 70.83% stake in the commitment wellbores while Journey will have a 29.17% interest.
After earning, Kiwetinohk will have 62.5% stake and Journey will hold 37.5% interest in the Commitment blocks, outside of the two commitment wells.
As part of the five well Option phase, Kiwetinohk will pay 100% of the capital costs, and have 100% working interest, before payout of 33.33% of its costs to drill, complete, equip and tie in.
After payout, Kiwetinohk will own 70.83% interest in the option wellbores while the remaining 29.17% stake will be held by Journey.
After earning, Kiwetinohk and Journey will have 62.5% and 37.5% stakes respectively in the applicable earned Option block, outside of the five option wells.
Journey president Alex Verge said: “The signing of the definitive agreement for the Duvernay play is a significant milestone for Journey, in our transition from a conventional value Company to an emerging growth Company.
“Journey has worked diligently in assembling its significant land position, in technically advancing the play, and now in selecting a partner that has both the experience and access to capital to lever on our efforts and develop this resource into a significant commercial success.”
Journey Energy plans to commence operations in the next 30 days, and complete the Commitment two well phase of the joint venture by the end of 2018.