Eureka Energy advised that Texas Crude Energy Inc ("TCEI") has been successful in its efforts to farm-out the consolidated acreage across the Sugarkane Gas and Condensate field. TCEI signed a farm-out with Hilcorp Energy Company, one the largest private E&P companies in the US, and field activities are expected to commence promptly.
The key elements of this farm-out for Eureka are as follows:
- The farm-in by an established company such as Hilcorp to the Sugarkane field is a significant endorsement of the multi TCFe potential of this gas and condensate asset and the value of Eureka's interest in the Sugarloaf land holdings within it.
- Eureka will be free carried for the drilling, completion and tie in of up to 3 new horizontal wells and the stimulation of the three existing Sugarloaf horizontal wells; Kennedy #1H, Kowalik #1H and Weston #1H. The Sugarloaf farm-in program aims to establish a total of 6 wells on production. Under the terms of our farmout to TCEI this work program has a series of deadlines over the next 20 months.
- The Farminee will earn an interest in Eureka's acreage incrementally as each farm-in activity is completed, up to a maximum of 50% of Eureka's interest in the Sugarloaf Area of Mutual Interest ("AMI").
- Eureka believes that this additional activity within the Sugarkane Field, together with the widespread ongoing regional activity occurring within the Eagle Ford Shale play will continue the process of demonstrating and establishing the considerable value of our interest in the Sugarloaf AMI within the Sugarkane Field.Hilcorp has committed to a farm-in over the Sugarloaf AMI and other land areas either adjacent to or nearby, with corresponding drilling requirements. This will lead to a meaningful drilling and completion program that aims to establish a portfolio of producing wells within the Sugarkane acreage that in turn will assist in demonstrating the multi Tcfe potential of the Sugarloaf AMI.
- The farm-in has been achieved despite the difficult market conditions existing in the US.
- Success with the strategy in consolidating acreage in order to collectively attract a marquee US E&P company into the area.
- Eureka's financial commitments through this development phase are now minimal.