Blugrass Inks LOI for Permian Basin Acreage
Blugrass has signed a letter of intent to acquire an oil and gas lease covering 4,807 acres located in the Permian Basin in Crockett County, Texas. The lease is currently owned by Dallas, Texas-based Petro Grande, which owns an 87.5% working interest. Acquisition of the lease includes full access to 3D seismic imaging of the lands under lease, from which geophysicists have identified a number of drilling locations in the Canyon Sands, Strawn and Ellenburger formations. The land position is on trend with numerous giant, multi-pay gas fields currently under production by major oil and gas companies, and is close to pipeline gathering and treating infrastructure. An independent geoscientist has estimated that there may be a resource of up to 168 BCF (billion cubic feet) of natural gas in this lease in the probable resource category.
In addition to the lease, Blugrass Energy would acquire an option to participate as a working interest owner in Petro Grande's other 9,850 acre leases, all of which include 3D seismic imaging.
The letter of intent contemplates that upon closing, Blugrass Energy would issue to Petro Grande, LLC a promissory note in the amount of $3.5 million, secured by the lease, plus shares of common stock comprising 75.0% of the outstanding shares.
The company anticipates that its head office will be moved to Dallas, Texas, and that the company's name will be changed to Rio Grande Petroleum. Senior management will be appointed by Petro Grande. The transaction is subject to due diligence and necessary approvals, including approval of an amendment to the Blugrass Energy Articles of Incorporation to increase the number of authorized shares.
Blugrass Energy is looking forward to completing this transaction and moving forward with a drilling and development program.