Silvermere Shareholders Approve Mustang Interest Purchase
Silvermere shares began trading on Aug. 31 in London after shareholders approved the acquisition of interest in the Mustang asset in the Gulf of Mexico and other resolutions.
The company announced in early August that it had conditionally risen £1.52 million via a placing at 25p her share, the proceeds of which would provide working capital for the Group and pay the costs associated with acquiring interest in the Mustang Island 818-L field and admission to trading on AIM, the London Stock Exchange's international market for smaller growing companies.
The development of the Mustang Island 818-L field, located in Kleberg County offshore Texas in the U.S. Gulf, is a field rehabilitation project targeting bypassed or only partially produced gas-condensate.
The field was drilled and produced by Samedan Oil Corp. in the 1980s, based on 2-D seismic mapping. From January 1980 to February 1995, the field had produced a total of 138.9 Bcf of gas. This includes production from the D1 and D2 wells, which are outside of the seismic area and therefore not taken into consideration for this evaluation. Total historic production from the wells within the seismic coverage is 125.6 Bcf.
At abandonment, some 25 wells had been drilled targeting several stacked clastic reservoir sands grouped as the A, B, G, and I sands. The I sands, which lie at depths of more than 11,000 feet, are the primary targets for the initial phases of development of wells within the Mustang asset.
The company is recommending three new wells in the outline field development plan to test and produce remaining gas, based on the fact that each of the three fault blocks mapped has a structural high that has not been drilled, supporting the idea of remaining attic gas being present.
Drilling and tie-in costs have been estimated between US $5 million and US $8 million, including the costs of connecting the wells into the existing infrastructure which is itself connected to the Six Pigs processing facility onshore on Padre Island, Texas. The infrastructure, including mini platform, flowlines, main 20-inch export line to Six Pigs and the Six Pigs processing facility, is believed to be in good order.
The Mustang asset comprises a 33.3 percent working interest and a 20.83 percent net entitlement interest (after deductions of overriding royalties) in the Mustang license area.
Silvermere, previously known as Chalkwell Investments Plc, initiated discussions last year with Core Oil and Gas Inc. which had agreed to terms to acquire the Mustang asset. Since November 2010, the company has made a series of loans to Core, which now total £2.595 million, which Core has used principally to finance its share of the costs for the re-entering and subsequent testing of the I-1 well, which lies within the Mustang license area, and to pay the consideration due from Core for the Mustang asset. On April 29, the company entered into the option agreement with Core, superseding a previous option between the parties.
Shareholders also approved a new board of directors for the company. Under the new board's guidance, Silvermere will pursue a strategy of acquiring a portfolio of U.S. oil and gas license interests onshore and in shallow offshore water, characterized by relatively low risk and low cost with the potential for near term production. The company said in a statement that the acquisition will provide a good base from which to develop this strategy.
"We are very pleased to be bringing the company back to the market with a promising and attractive asset," said Chief Executive Andy Morrison earlier this month. "The area surrounding the Mustang Asset has a proven producing history and continues to have significant potential."