The subject properties are located adjacent to existing light oil production and in close proximity to existing infrastructure.
The consideration for the acquisition will be $272.63 per acre, payable in cash.
The company will acquire a 100% interest in all three leases subject to a sliding scale royalty on production starting at 17% of production and being reduced by 1% for each 1% by which the aggregate of all government royalties applicable to production under a particular lease exceed 5%, down to a minimum royalty in favor of the vendors of 10%.
To facilitate payback of drilling costs, the royalty will not apply to the first 30,000bbl of oil equivalent production from the first horizontal well or 20,000bbl of oil equivalent production from the first vertical well drilled on each property to the Red River formation within four years after closing.
An AMI of 3km from the outer lease boundary of each property will be in effect.
If any land is acquired within any such AMI, it will form part of the property subject to the AMI, and be subject to the same royalty.
The three properties, to be known as Parcels J11, J12 and J13, are located on a productive trend within a structural belt that is parallel to the prolific Minton Red River oil field. Parcel J11 is located directly on top of an interpreted basement structural high, and J12 is located on the northeast side of a basement structural high. All three parcels are in close proximity to excellent Red River production.
As part of the company’s growth strategy, it plans to retain Chapman Petroleum Engineering to assess the NI 51-101 resource potential of these parcels and complete detailed reviews of all its lands in final preparation for drilling.
