BNK Petroleum Sells Off U.S. Acreage for $10MM
BNK Petroleum has executed a Purchase and Sale Agreement with a privately owned Delaware company (the "Purchaser"), to sell approximately 2,800 acres of oil and gas leases which is not currently a part of the Tishomingo Field development, in Carter County, Oklahoma and an estimated 86,000 acres of leases in the Black Warrior Basin of Mississippi and Alabama for US $10 million.
Concurrent with this Agreement, BNK has also entered into an Exploration Agreement with the Purchaser in regard to the Black Warrior acreage whereby BNK can earn up to a 50% working interest in a portion or all of the Black Warrior acreage by drilling a series of test wells on identified prospects. The exploration program requires BNK to pay for the Purchaser's share of costs in the test wells.
BNK is currently projected to incur an expenditure of up to US $10 million in order to earn the 50% working interest. The first three wells are on a drilling schedule to begin by September 30th, 2009. Failure to commence any of these wells on scheduled dates could subject BNK to liquidated damages of $500,000 for each well. The transaction is expected to close in mid December. In addition BNK has agreed to allow the Purchaser to participate for a 20% interest, at its proportionate cost, in a new shale exploration project that BNK is currently reviewing.
The Company intends to use the proceeds from the sale in the continued development of its Tishomingo Field in the Ardmore Basin, Oklahoma and for general working capital purposes.
BNK is also pleased to announce that it is now producing about 650 BOEPD net to BNK and has wells that are capable of producing, but are shut in awaiting gathering system hookup for another 150 BOEPD for a total of about 800 BOEPD net to BNK.
These numbers assume a suboptimal recovery of NGL's from the temporary processing plants. One of the temporary plants only recovers about 0.6 gallons per MCF. This plant is expected to be decommissioned in the first quarter of 2009 when the Tishomingo Field is connected to the previously announced Atlas Velma Cryogenic processing plant through a wet gas gathering line.
BNK along with its partner is currently completing the main gathering system to allow the tie in of the remaining wells. Due to lower oil and natural gas prices, the Company has slowed down the pace of its fracture stimulations to coincide with the parts of the gathering system coming on line. In a number of its wells, BNK has only fracture stimulated a portion of the wellbores. The remaining portion of the wells will not be stimulated until mid 2009. BNK has currently one well still drilling which offsets the Dunn 2-1H well. BNK is very pleased with the production results it has achieved so far.