Imperial's subsidiary, Imperial Oil & Gas, has entered into a non-binding Letter of Intent for the purchase of a 35 acre mineral lease in Montague County, Texas.
The LOI has come about as result of evaluation of an additional opportunity, other than those reported on December 2, 2008, but similarly in line with Imperial's strategy to develop low entry cost, lower risk opportunities with the potential for rapid payback, to complement the Company's planned Resource Plays.
The LOI contemplates an agreement to acquire a mineral lease over 35 acres with multiple possible producing formations, including the Strawn Conglomerate, and the concurrent acquisition of an existing well bore. Imperial understands that the well bore was abandoned, historically, because of a lack of completion funding. Imperial's initial investigation reveals that there were several paying wells surrounding the well bore. Most of the existing wells were drilled many years ago and no techniques were used to drain an area other than the near wellbore portion of the formation. Imperial intends, subject to due diligence, to re-enter the well with a view to analyze the existing well bore using modern technology not available at the time of abandonment and then completing the well in one or more of several possibly productive zones. The aim is to rapidly put the well on production at a very low entry cost.
The Strawn Conglomerate formation is known to consist of multi-pay zones containing both oil and high BTU content gas, with long term flow characteristics.
The LOI is intended to lead to a contract, subject to final due diligence which will include title and historical well record checks, and a wire line inspection of the existing well bore.
If progressed to contract, Imperial believes that the potential cashflow from any well successfully completed and put on production will provide useful revenues as the Company progresses, in concert, its planned transformational Oklahoma Resource Play and Salt Water Disposal Well opportunities.
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