The terms of the agreement call for Noble Energy to pay Teton $300,000, in cash, at signing, followed by $2.7 million, in cash, subject to certain contingencies, at the end of the due diligence period on January 27, 2006. Noble will also commit to drill and complete 20 wells on Teton acreage, at no cost to Teton. The first 10 wells must be drilled and completed by December 31, 2006, with the second 10 wells to be drilled and completed by March 1, 2007. Thereafter, Teton and Noble will share all future drilling costs according to their respective working interests. Upon completion of the 20-well earning program, Noble will earn a 75% interest in approximately 182,000 net acres, with Teton retaining a 25% working interest.
Teton's DJ Basin acreage represents a potential eastward extension of the prolific Niobrara formation producing trend in Yuma County, Colorado. Two major 36-inch pipelines, the Kinder Morgan Pony Express and the Kinder Morgan Trailblazer lines, traverse the Teton acreage.
Karl F. Arleth, Teton's President and CEO, said: "We are very pleased to have Noble as a partner in our DJ Basin project. We see today's agreement as an opportunity for Teton to manage the risk and cost of developing our DJ Basin acreage position. Noble's substantial technical and operational expertise in the DJ Basin makes them the ideal operator. Teton will continue to devote substantial effort to capturing additional opportunities in 2006. Today's agreement exemplifies Teton's strategy of acquiring assets with acceptable exploration and production risk profiles and then creating additional shareholder value by partnering with top operating companies to realize the upside potential of the asset."
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