Portal Resources has signed a Purchase and Sale Agreement (P&SA) for the acquisition of production and assets from an intermediate NYSE listed oil producer for $9.1 million. The assets are located in West Central Saskatchewan and produced 365 boe/day during the month of August. The effective date of the transaction is August 1, 2011.
The acquisition includes a 100% working interest in 19 sections (13,340 acres) of land, two sections (1,280 acres) of gross overriding royalty lands, approximately 20 sections of proprietary 3D seismic and 125 line km of proprietary 2D seismic. There are 38 wellbores on the property. Oil is produced to single well batteries (tanks) and natural gas production (non-associated) is tied into approximately 30 km of natural gas pipeline and infrastructure included in the transaction.
The current production from the property is approximately 65% heavy oil (12 degrees API) with 35% being non-associated sweet gas. A third party engineering report completed by McDaniel & Associates Consultants Ltd. of Calgary, Alberta dated December 31, 2010, internally adjusted for year to date production, indicates a property wide total proved reserves estimated to be 397 thousand stock tank barrels of oil equivalent (Mstboe) with proved plus probable reserves of 711 Mstboe. Acquisition metrics based on these estimates are attractive at $25,000 per flowing boe/d, $33.60 per barrel on a proved developed producing reserve basis and $12.90 per barrel on a proven plus probable reserve basis. An updated engineering report reflecting the effective date of the acquisition is being prepared.
The existing oil pool being purchased (McLaren formation) has cumulative production of approximately 1.6 MMstboe. Portal's internal evaluation of the asset indicates the potential to increase its value in a meaningful way through an increased inventory of seismically defined infill, step-out and exploratory drilling locations.
"This acquisition greatly expands our land position in this core area of focus and our team sees the potential for both near term daily production increases through a series of restarts and workovers as well as the potential to expand the overall reserve base on the project through further development. Coupled with the attractive acquisition metrics it is our belief that this project and our holdings in this region will provide a solid platform from which to grow," stated David Hottman, President & CEO.
The effective date of the transaction is August 1, 2011 with a closing date scheduled for November 30, 2011. An initial payment of $500,000 has been made in accordance with the terms and conditions of the P&SA. This transaction is subject to TSX Venture Exchange approval and financing.
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