Rocky Mountain Corp Acquires San Juan Basin Properties
Rocky Mountain Energy Corporation has executed a purchase and sale agreement on approximately 24,000 acres of oil-producing properties in the San Juan Basin, outside Farmington, N.M. The properties consist of current production of 250+ bopd ($75,000 per month at current prices) and have 10 million barrels of proven reserves of oil, 8.4 million barrels of which is proved undeveloped at depths from 1300' to 2300'. Some 100 development wells are planned over the next three years which are designed to bring production to 3,000 bopd ($2.1 million per month at current prices). An outside reserve report by noted engineers Ryder Scott & Co. value the reserves at a minimum of $60 million, discounted at the net present value of 10%, the standard industry valuation model. The reserves are valued at $120 million, on a non-discounted basis, based upon a price of $23.50 for oil. Oil is currently over $30 per barrel.
The purchase price for the acquisition is $5.5 million, which is expected to be financed through the company's Residential Resources credit line. No share dilution is expected. Closing is scheduled for March 31, 2003.
"The acquisition of this oilfield in San Juan County is in keeping with our primary objective of long-term Rocky Mountain production base. The price per barrel of proved reserves is $0.55 per barrel acquisition cost. At another $0.75 per barrel development cost, assuming the use of our own equipment as planned, we will have $1.30 per barrel sunk cost in the field. The economics are therefore quite good," said John N. Ehrman, president and CEO. "The adjoining gas fields, which continue to be acquisition targets of ours, make this a key strategic acquisition. We plan to drill wells and then hedge oil prices at these high levels to the extent possible to provide a predictable cash flow. We continue to move towards closing on other acquisitions with higher current production rates as well."