The acquisition includes four producing wells with collective average production of 30 barrels of oil per day.
The acquisition includes 3.25 sections of undeveloped leasehold with the potential to drill an additional 10-12 horizontal wells in the defined pool, and production facilities necessary for further development.
As per the terms of the JV, Nextraction will completely fund the acquisition and receive the production revenue in totality until payout of the acquisition, or until Magnum has paid Nextraction for its share of the investment.
Upon repayment of the acquisition investment, production revenue shall be shared equally by Nextraction and Magnum.
Nextraction will also pay 100% of the costs to drill and complete two horizontal wells of 800m in depth and 900m horizontal leg, with the first well, according to the JV agreement, to commence before the end of June 2011.
While the revenue from the first two horizontal wells is to be shared equally, costs and revenues for all subsequent wells will be shared equally.
A unitization study of the Provost Viking A pool, which is a part of the Provost Field, by McDaniel Consultants in 1968 indicated that the pool contained over 80 million barrels of oil in place.
In the Provost Viking A pool identified in the McDaniels report, the JV has acquired about 15% of the lands, Nextraction said.
