Magnum Energy is pleased to announce that it has amended its joint venture agreement ("JV Agreement") with Nextraction Energy Inc.
Under the terms of the original JV Agreement, Nextraction was required to drill, complete, equip and tie-in two horizontal wells, at its sole expense, to earn a 50% working interest in each well and in certain lands in the Provost area Viking Oil Property.
Under the terms of the amendment, Magnum has released Nextraction from its obligation to drill a second horizontal well in exchange for approximately $1.2 million, which proceeds were used to fully repay the loan to Nextraction.
Effective October 1, 2011, Magnum will act as the operator of all drilling, re-completions and production of the Provost area properties. As it has now retired the debt to Nextraction, it is entitled to immediately retain the cash flows generated from its working interest in the Provost wells. Magnum is now also in a position to determine which projects will provide the best opportunities for future development of this Viking oil prospect.
Magnum has recently received approval of a Holding Application which allows for the drilling of up to four wells, whether vertical or horizontal, per quarter section on the 3.25 sections of land originally acquired in Provost.
Magnum's technical team is reviewing optimization programs to increase production levels from the first horizontal well. The completion of the gas pipeline for the well will be fully funded by Nextraction and is expected to occur no later than December 31, 2011. Concurrently, Magnum will acquire a new surface lease and drilling permit for drilling the second horizontal well. Both companies have agreed that a new location identified for the second horizontal well optimizes the full potential of the zone and can be drilled at lower costs using monobore technology.
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