Lynden reported that its subsidiary, Lynden USA, has entered into a Participation Agreement to acquire a 50% interest in an option to acquire oil and gas leases covering 101,495 gross and net acres in Coke, Mitchell, and Sterling counties of West Texas.
All acreage is contained within a historical ranch, whose lands were recently optioned by CrownRock LP ("CrownRock"), Lynden's partner in an existing project in West Texas. The ranch lies to the immediate west of the Jameson oil field and is approximately 10 miles south-east of the Iatan oil field.
The project will be focused on Permo-Pennsylvanian-aged detrital targets along the eastern shelf of the Permian Basin where there are numerous opportunities across several pay zones, all of which are shallower than 8,000 feet in drilling depth. Management believes the opportunity to acquire an interest in such a large and contiguous land package in the Permian Basin is unique.
Locations for two initial wells have been selected, and the wells are scheduled to be spudded in June 2010. The first location is on the west side of the ranch and is less than 2 miles from a well that has produced in excess of 190,000 barrels of oil equivalent. The second location is on the eastern side of the property, approximately 4 miles north-west of the Jameson field. The locations are approximately 14 miles apart.
Pursuant to the Participation Agreement with CrownRock, Lynden will acquire an undivided 50% interest in CrownRock's option to acquire a 100% working interest in the 101,495 acres, subject to a 22.5% royalty to the mineral rights owners. Lynden can earn its interest in the option by paying 100% of the costs to drill and complete the first two wells (up to US$2,400,000) and by making additional payments to CrownRock totaling approximately US$3,000,000. The option can be converted into a lease(s) through additional payments to the mineral rights owners. The option has an initial term of 18 months with provisions to extend the option an additional 18 months.
The project will be operated by CrownQuest Operating LLC of Midland, Texas.
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