Blue Horizon's wholly owned subsidiary, Blue Horizon Energy has closed a transaction with an arm's length private oil and gas company pursuant to which Blue Horizon Energy acquired a 100% interest in 4,160 acres of non-producing petroleum and natural gas rights located in the Haro, Alberta and Waskada, Manitoba areas, hereinafter referred to as the "Assets".
The purchase price for the Assets was $700,000 which was paid to the Vendor by the issuance by the Corporation of 2.8 million common shares at a deemed price of $0.25 per common share and 1 million common share purchase warrants. Each warrant is exercisable into one common share of the Corporation at an exercise price of $0.40 per common share until April 12, 2013. In the event that the closing price of the Corporation's common shares on the Canadian National Stock Exchange ("CNSX") is at least $0.80 for a minimum of five consecutive trading days, whether or not trading occurs on such days, the Corporation may, in its sole discretion, provide written notice to the holder of the warrants that the exercise period has been reduced to 30 days following delivery of such notice. In connection with the purchase of the Assets, Blue Horizon Energy has granted to the Vendor a 3% gross overriding royalty on all production that is generated from the Assets as well as a 2% gross overriding royalty on all production obtained from additional lands acquired by Blue Horizon Energy within two miles of the Assets. All of the common shares issued by the Corporation are subject to a hold period of four months and a day from October 13, 2011 under applicable securities laws and the rules and policies of the CNSX.
The acquisition of the 100% interest in the petroleum and natural gas rights underlying the six sections of land at Haro Alberta and the half section of land in the Waskada area of Manitoba allows Blue Horizon Energy to uniquely position itself to cost effectively potentially establish light oil reserves adding to the Company's diversity in the energy sector. This acquisition has set the stage for Blue Horizon Energy to drill horizontal wells in areas where a number of major oil and gas companies are already operating. The Corporation will initially focus on horizontally drilling for oil in the prolific Spearfish formation in Manitoba where licensing and permitting of the first new drilling location has been initiated in anticipation of meeting the Corporation's target to horizontally drill, complete and fracture a minimum of two horizontal wells by April 2012.
"Blue Horizon is focusing on drilling low cost, high productivity wells," commented Clint Melnechenko, Vice President of Operations, Blue Horizon Energy. "This acquisition fits perfectly into our diverse business model and reduces our reliance on strictly developing our bitumen play in the Peace River Arch area of Alberta. Our intention is to be uniquely positioned to produce oil ranging from heavy to light oil which we believe will prove to be an advantageous position to be in, in the ever changing marketplace."
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