9th May 2016 07:05
LONDON (Alliance News) - Regency Mines PLC Monday said it has signed an agreement that will allow the company to bid for a majority stake in an oil well located in Wyoming, US, after the previous owner went bankrupt.
Regency Mines is a diversified natural resources company with investments and exploration activity covering base metals and oil. The company has signed a non-binding heads of agreement that will allow the business to bid for the well under an auction process.
If successful, Regency Mines would acquire a 75% non-operating working interest in the well and a net revenue interest of 60%, it said.
The well has only recently been drilled at a cost "in excess" of USD4.0 million, but the previous owner could not finish the well off after being hit by "financial difficulties". Regency did not reveal the name of the previous owner, with the well being sold by a court-appointed trustee under US bankruptcy law.
"The identity of the company's US partner cannot currently be released due to competitive reasons associated with the auction, however this information will be announced upon award of a successful bid," said the company.
Regency said the previous owner, using well logs, calculated the well could contain around 470,000 barrels of recoverable oil from multiple zones, with more than 150,000 of those barrels thought to lie within the two deepest zones - which Regency said would be the first to be targeted.
Overall, the entire acreage that the well lies within is estimated to contain 29.0 million barrels of oil - but Regency will only hold an interest in the one well. There are five producing fields surrounding the well, which all produce from one or more of the same zones that Regency's potential new well would produce from.
If Regency is successful in bidding for the well, it will also acquire a 75% stake in the unnamed US company's right to earn more than 9,000 net and gross acres of oil and gas leasehold interests surrounding the well, meaning Regency is looking at expanding the area around the one well.
The struggling US company will retain a stake in the project, with Regency covering its partner's costs to complete the well. Regency will also fully fund the next two wells to be drilled nearby. After that, Regency will be liable for 75% of the costs with the US partner paying the other 25%.
"Regency is currently budgeting a commitment of under USD1.0 million for the process and has agreed to pay the US partner a "prospect fee" of USD100,000 on the successful acquisition of the interest. Should costs materially exceed these amounts Regency would expect to bring in partners to the investment," said Regency.
Regency shares were up 2.9% to 0.41 pence early Monday.
By Joshua Warner; [email protected]; @JoshAlliance
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