VHGI Energy, through its relationship with Gulf Coast Exploitation, was the successful bidder on oil and gas leases on 1,280 contiguous acres in the Texas State Waters. These leases, which are located in the High Island, Jefferson County, Texas area, will be for five-year terms and will be signed by the Texas General Land Office within 30 days.
The 1,280 acres encompasses a structural feature adjacent to the High Island 60 field which has produced an estimated 3 million barrels of oil. Gulf Coast Exploitation was the successful bidder on the leases, paying $506,400.00, and has agreed to assign the leases to VHGI Energy. VHGI Energy will hold a 100% working interest in the leases, which will equate to a net royalty interest ranging from 80% to 75% (depending on achieving development milestones within the 5 year term), which net royalty interest will be shared with Gulf Coast Exploitation on a basis to be determined.
"This is a 3 million barrel prospect that, if proven, has the potential to generate 2 million net barrels, which in turn has a potential value of +/- $100 million PV at 10%, using a price of $60 per barrel. Once drilling is completed and production commences, the monthly oil production should exceed 3,000 BOPD net. VHGI Energy has not decided whether it will raise capital and drill the prospect or farm-out the drilling," stated John Thibeaux, VHGI Energy's registered petroleum engineer.
"This was a major step moving forward for VHGI Holdings in the execution of our business plan," stated Jim Renfro, VHGI Holdings president. "The oil market continues to remain strong and our top priority is to position VHGI Energy to begin producing revenues as soon as possible, which was one of the primary reasons for signing an agreement to purchase the assets of Sterling and Yazoo as was previously announced in our 8 K filings," continued Renfro.
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