American Petro-Hunter reported Thursday that the company has executed a binding term sheet for the acquisition of a 15,000 acre land package located in central Kansas. The acreage is located in the heart of lands undergoing horizontal well development of the Mississippian "Osage" chert by several major companies.
The agreement is for an 80 percent working interest (W.I.) in the play and carries an 81.25 percent net revenue interest (N.R.I.). This will add 12,000 net acres to the company's land ownership. Of significance, American Petro-Hunter will be acting as the operator of the project and will be able to dictate the timeline for the lease development.
The geology of the leases shows the depth of the Mississippian "Osage" at 3,300 feet with thickness within the prospective area ranging between 40 feet to 50 feet. The formation has suitable frack barriers above and below the Mississippian "Osage" in the prospect area amenable to multi-stage frack completions similar to other company operations in the area. As the only potential water to be disposed of will be from the Mississippian "Osage" formation pay zone, this may greatly reduce the number of potential water disposal facilities required and ultimately reduce operating costs.
The uniform rock characteristic of the Mississippian "Osage" leads us to believe that this may be an economically repeatable "play" and compares well to regional analog production. There are additional secondary objective targets located above the Mississippi "Osage" in the Lansing and Kansas City Formations.
The Mississippian "Osage" chert play was kicked off in 2012 by the drilling of the Unit Corp #1-21H Overall (section 21-25S-10W) drilled to a total depth of 8,115 feet and was completed in June 2012. Cumulative production for this well during the first five months has been reported as 30,226 barrels of oil and 20,375 thousand cubic feet of gas. (201 barrels of oil per day, 135 thousand cubic feet of gas per day). American Petro-Hunter is targeting a potential of 200 barrels per day from the wells for initial going forward planning.
Since the completion of the test outlined above, there have been 30 horizontal locations filed for permits. Currently there are 12 producing horizontal wells, 11 undergoing drilling and completion, and an additional 20 wells permitted in the area.
The company will report on the progress of the transaction, which is presently undergoing title review and engineering due diligence.
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