The acquisition also includes like interests in 126 wells that are in varying stages of development or the dewatering phase and are expected to come into production over the next year, as well as interests in nearby undeveloped acreage. The interests being acquired encompass project areas covered by program interests in 12 drilling programs/partnerships. Current production from the 41 producing wells is in excess of 92 million cubic feet of gas per month. Terms of the acquisition include the payment of $2 million cash at closing and a supplemental payment to be made 90 days after closing based on the mutually agreed fair market value of the assets acquired. Closing is expected to occur on or before September 23, 2004.
The letter of intent will be subject to the finalization of a purchase and sale agreement. The interest of Fellows prior to payout will vary from a 1 to a 12% working interest plus management fees plus the 2% overriding royalty interest, prior to increasing to a 20%-30% working interest. Fellows president George Young said "This transaction gives us an attractive presence in the producing area of the Powder River Basin, and will supply cash flow to the Company to assist in developing the 240,000 acres we already have acquired in other areas. It represents yet another significant step in the rapid growth of Fellows."
Fellows is continuing its drilling operations on its second project, the Johns Valley Project in Southern Utah, and is preparing permitting on its Gordon Creek Project near the successful Drunkard's Wash in Central Utah and the Weston County Project in Wyoming.
In addition to its drilling operations, Fellows is continuing its aggressive acquisition program, and has a number of quality projects under review, including projects submitted by third parties and projects presented under its agreement with Thomasson Partner Associates of Denver, Colorado ("TPA"). The agreement calls for TPA to present to Fellows an average of eight (8) projects per year with an area of interest of from 10,000 to 80,000 acres per project. Each project presented must represent a reasonable potential of at least two hundred (200) billion cubic feet of natural gas reserves (200 BCF) or twenty (20) million barrels of oil reserves (20 MMBO). Fellows will have the right under the agreement to acquire a 50% interest in each project presented, with the other 50% to be offered to a major industry partner.
Most Popular Articles