Delta Petroleum has closed a transaction with EnCana Oil & Gas (USA) Inc., to jointly develop a portion of EnCana's leasehold in the Vega Area of the Piceance Basin. In addition, Delta has acquired over 1,700 drilling locations on approximately 18,250 gross acres with a 95% working interest. Delta also increased its interests in currently producing wells and will realize an addition of six thousand cubic feet ("Mcf") of natural gas net per day.
The transaction increases the Company's working interest in the North Vega project leasehold to 95% from an average 50%, with additional acquired acreage that includes the Buzzard Creek federal unit (4,300 acres) and approximately 6,000 acres immediately adjacent to the Buzzard Creek Unit. With this agreement, the Company's acreage position in the Vega Area totals over 20,250 net acres.
The Company estimates that the transaction's total resource potential is in excess of 1.4 trillion cubic feet equivalent ("Tcfe") giving the Company in excess of 2.0 Tcfe in the Piceance Basin. This also brings the Company's estimated total proved reserves to approximately 530 billion cubic feet equivalent ("Bcfe"). The effective date of the transaction is March 1, 2008. Under terms of the agreement the Company has committed to fund $410.5 million with $110.5 million at closing and three $100 million installments over the next four years that have been guaranteed with a Letter of Credit.
Roger Parker, Delta's Chairman and CEO said, "This transaction more than doubles our position and drilling inventory in the southern Piceance Basin in one large contiguous acreage block. As previously demonstrated, we have significantly improved our drilling and operational efficiencies in the Vega Area thereby substantially enhancing our financial performance in the Piceance Basin."We are also announcing an increase in our 2008 drilling capital expenditure budget to a range of $350 to $370 million. The increase in our drilling capex budget allows us to accelerate our Vega Area drilling program and realize significant reserve growth and increases in the present value of our Piceance assets. We are running four rigs full time and expect to increase to eight rigs over the next 12 months in this area. Most importantly, this agreement provides Delta a significant drilling inventory for predictable, repeatable production and proved reserves per share growth for years to come."
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