U.S. Energy Corp. announced the spudding of its first well under a previously announced Participation Agreement with Houston, Texas based Houston Energy L.P. ("HE") whereby USE acquired a 10% working interest in an oil and gas prospect located in Southeast Texas. HE is the operator of the project.
The well is located in Matagorda County, TX and it is the first of up to three prospects that may be drilled on the leasehold. HE believes the first well has a resource potential of 6.6 BCF and 1,296 MBO. The well will be drilled to an initial depth of approximately 11,100 feet and USE's commitment is approximately $216,000 to a casing point decision. Drilling is expected to be completed in 30 days after initial spud.
Under the terms of the agreement, USE is responsible for 10% of the costs to drill an initial test well (ITW) to earn an 8.5% after casing point (ACP) working interest (6.2% net revenue interest). There is also a 10% after prospect payout (APO) back-in working interest due the operator, which would reduce USE's working interest to 7.65% (5.6% net revenue interest) APO.
"Drilling this initial test well is an important step forward in our relationship with Houston Energy and key to our strategy to increase production by leveraging the expertise of our partners," stated Keith Larsen, CEO of U.S. Energy Corp. "Depending on the success of this well, we'll look at additional opportunities to participate in projects with Houston Energy on a going forward basis," he added.
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