Enhanced Oil Resources has entered into a purchase and sale agreement with Kinder Morgan CO2 Company, L.P., a wholly owned subsidiary of Kinder Morgan Energy Partners, for all of the Company's rights, title and interest in the St. Johns dome and certain related assets, located in Apache County, Arizona and Catron County, New Mexico. In addition, upon closing, Kinder Morgan has agreed to amend the CO2 gas sale and purchase agreement with the Company, originally announced on April 20, 2010, modifying the dates of pipeline connection and the date of first deliveries and eliminating the termination fee.
The purchase price is U.S. $30,000,000 for the assets and is subject to certain post-closing adjustments and conditions. Closing is targeted to occur on, or before, December 1, 2011 and is subject to a number of conditions, including the renegotiation of a material third-party contract and regulatory approval by December 31, 2011. SunTrust Robinson Humphrey, Inc. is serving as financial advisor to the Company in connection with the transaction.
Barry Lasker, President and Chief Executive Officer of Enhanced Oil Resources said, "The monetization of St. Johns is an important step forward for the Company and will enable an acceleration of our infill oil development and exploitation program within our 27,000 acres of San Andres leases in New Mexico. Ultimately, we anticipate that the cash proceeds and other consideration provided from this sale will help finance our planned CO2 flood at the 5,000 acre Milnesand field and potentially at the adjacent 20,000 acre Chaveroo field. While St. Johns offered tremendous long-term potential for the right company, the capital financing risks including our cost of capital and continuing associated carrying costs were considered to be too onerous on a company of our size. The opportunities for oil reserve growth in today's environment both in our San Andres infill projects, our CO2 flood opportunities and other new venture developments are too compelling not to be our immediate focus."
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