Solimar Energy (Solimar) has acquired a package of leases consisting of approximately 4,500 acres that cover extensions of two produced oil fields in the San Joaquin basin, California. Solimar will operate the acreage with interests of between 50% and 70%.
Solimar estimates oil in place of over 35 million barrels in the project that covers extensions of the Guijarral Hills oil field. The field is abandoned having produced over 50 million barrels of light oil with gas since discovery in 1948.
The field has at least four sandstone oil reservoirs at depths between 7,500ft and 11,000ft and production wells commonly achieved initial production rates (IP’s) of over 500 bopd.
Solimar does not expect to achieve production rates as high as the early wells on the field when the reservoir and pressure conditions were pristine. The company is therefore focussing on the next stage of technical work on identifying those parts of the field extension likely to have been less efficiently swept by the original development and where commercial flow rates and good recovery of the remaining in place oil can be reestablished.
Following selection of the first test wellsite, the company plans to introduce a farm in partner(s) to part fund the well on a promoted basis. Solimar will still retain the largest equity in the project post farm out but with reduced cost exposure. The company has planned a well by calendar mid year 2010.
The consideration for the acquisition has been initial payments of less than $150,000 and assumption of royalty obligations over the leases. The total royalties will not however exceed 24% suggests that the commercial terms for development of any light oil proved up by the drilling will be very attractive.
Additionally, Solimar will carry Quest Petroleum through administrative costs including lease rentals and various technical studies leading up to but not including the drilling phase in the two lease areas.
Existing partners in the project are Quest Petroleum, who will have between 20% and 30% in the entire acreage position and Neon Energy who will have a 30% holding in two sections covering 1,280 acres.