Result Energy Inc. provided an operations update in regards to the company's project activity in the Horn River Basin, northeastern British Columbia.
At a recent Crown land sale, Result and a joint venture partner were successful in acquiring an additional 18 gross sections of mineral rights in the Gunnell Creek area of the Horn River Basin. Upon completion of satisfactory earning provisions by Result's partner, Result's landholdings in the Horn River Basin will increase to 58 gross sections (41 net), all of which are highly prospective for the Muskwa-Evie shale gas and Keg River platform gas plays. Result intends to satisfy its financial obligations with respect to the new land acquisition through a private placement issuance of common shares from treasury, subject to regulatory approval.
In the Gunnell Creek area, Result has acquired an interest in 18 additional sections of mineral rights immediately adjacent to the Company's existing 25 sections of land. This acquisition was made under a joint venture with a major public energy trust, with Result's interest in both parcels at 60%. Additionally, Result has been designated operator of record for this project area. Result plans to satisfy its 60% share of the land acquisition costs through a private placement of approximately 4,158,522 common shares to the joint venture partner at a deemed price of $0.533 per share, which represents the trailing weighted average market price of Result's common shares for the 20 business days prior to the land purchases.
Result and its joint venture partner are finalizing a proposed capital program for Q1-09, which shall include the drilling of 2 vertical test wells, plus the acquisition of additional seismic and land. Subject to certain conditions, the partner has agreed, as part of its earning and equalization fee in the joint venture, to either pay up to 70% of the capital costs of these two wells or acquire previously identified strategic assets, in return for a 40% working interest in Result's existing 25 contiguous sections of land.
Result has recently purchased and re-interpreted a 3-dimensional trade seismic program over a portion of its lands at Gunnell Creek. This data indicates several promising drilling targets in the Devonian platform, one of which will be tested in Q1-09. The second well is programmed to core and fully evaluate the Evie and Otter Park shale gas section. Excluding future land acquisitions, the program costs for the Q1-09 activity at Gunnell Creek are estimated to total $9 million, of which Result's share is estimated at $3.3 million or $5.4 million. The Company's capital budget for the Horn River Basin in Q1-2009 remains at an estimate of $10 million net, which it intends to fund via a combination of cashflow, and an equity issue later this year.
Commenting on these recent developments, Bill Matheson, Result's President and CEO said, "We are extremely happy with our success at the recent land sale. With this new joint venture partnership in place, Result has cemented its position as the pre-eminent junior E&P player in the Horn River Basin. We have also increased our gross land position in this exciting shale gas play by 45%, while being able to manage project spending. As well, the recent prices paid in the south part of the basin resoundingly validate Result's strategy for N.E. British Columbia."
Result also announced that the remaining $955,000 principal outstanding on its previously issued convertible debentures was converted to common shares in June 2008, resulting in the issuance of 2,387,500 common shares from treasury. Upon closing of the private placement for the Gunnell Creek land acquisition, Result will have a total of 63,487,660 common shares outstanding.
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