Sun River Energy has signed an agreement with Katy Resources ETX to acquire a majority of Katy's operated oil and gas properties for $5m in cash and $3.5m in shares of its common stock, subject to adjustment.

Under the agreement, Sun River will acquire leasehold assets, which include three producing gas units and four lease prospects.

Total acreage held by production under this acquisition is 2,486 gross acres, and in addition, there are 9,706 gross acres within primary terms on multiple leases.

The company estimates total proved reserves of 17 billion cubic feet equivalent (bcfe) of natural gas under this acquisition, proved developed producing reserves of 1.1bcfe, proved developed non-producing reserves of 3.7bcfe, and proved undeveloped reserves of 12.2bcfe.

The net present value of future cash flows discounted at 10% from proved reserves is estimated to be $25.3m, and in addition to proved reserves, 3P reserves are estimated at 89bcfe and total potential resources are estimated at 270bcfe.

The company estimates there are an aggregate of 253 additional drilling locations in the leasehold assets to be acquired.