Frontier Energy Inks LOI for West Texas Oil, Gas JV
Frontier Energy announced the signing of a Letter of Intent to form a joint venture with RJ Oil & Gas LLC ("RJ"), a private corporation located in Denver, CO. The objective of the joint venture is rehabilitation, exploitation, optimization and further development of certain oil and gas properties located in Callahan County, Texas, in the vicinity of Abilene. For an investment of $250,000, Frontier has the right to earn a 49% working interest in three leases containing some 450 acres, 10 producing wells, 32 additional wells available to be returned to production, 4 injection wells and ancillary facilities and equipment. The property also has potential for additional drilling in which Frontier will participate for its proportionate share. RJ will operate the leases. A key element of the transaction -- immediately upon execution of formal agreement(s), Frontier will earn a proportionate share of any production in the joint venture.
Subject to Frontier's satisfactory due diligence, expected to be completed by the end of April 2009, the first stage of investment is the optimization of existing producing wells and the rehabilitation of another 10 wells. The drilling of one well, targeted for new oil, is planned as the second stage. Subsequent investments and developments will be based on results of the initial investment programs. Frontier is negotiating with certain funding sources to finance the $250,000 it is required to commit to earn in the joint venture, all of which are subject to certain terms and conditions including completion of satisfactory due diligence. Frontier intends to disclose details as developments occur.
Richard Shykora, CEO of Frontier, commented, "With this transaction, Frontier has a tremendous opportunity to return to its primary objective of oil and gas exploration, development and production, particularly in an established, prolific West Texas oil and gas basin. This joint venture has the potential for immediate revenue, NAV and upside for the Company on value-added terms. We enthusiastically look forward to our business association with RJ and consider this to be Frontier's first small step in expanding its participation in West Texas oil and gas. We anticipate the support and satisfaction of our shareholders in this endeavor."