Molopo Acquires Permian Basin Stake

Molopo Energy on Tuesday announced that it has successfully negotiated the purchase of its partner’s 22 percent interest in the Fiesta project in the Permian Basin, West Texas for a total consideration of $9 million. The transaction is expected to close on 17 April 2012, subject to confirmation of title due diligence, with an effective date of 1 April 2012.

This acquisition adds a further 5,423 net acres, or 8.5 sections, to the Company’s position in the Permian, bringing Molopo’s total Fiesta project acreage to ~25,000 acres. It provides Molopo with a 100 percent interest in the project (subject to 20 percent back in rights after pay out).

Molopo has recently completed three 5,000 foot (1,524 meters) horizontal wells in the Wolfcamp A interval which have flowed oil under test and are currently having production pumps installed. The Wolfcamp interval (comprising A, B and C intervals) has been demonstrated to exist across Molopo’s acreage with a thickness of ~ 1,100 feet (335 meters), based on the results from the two vertical stratigraphic wells drilled by Molopo during late 2011. These wells also confirmed the presence of hydrocarbons in the deeper Canyon Sands interval, and there is good potential for Ellenburger production across the acreage, as evidenced by nearby operators.

Following the encouraging results from these first wells in the Fiesta project, Molopo is preparing an expanded drilling programme for the remainder of 2012 which will be based on the drilling of long horizontal wells (7,000 ft (2,133 meters) and longer) and a higher number of frac stages. These wells are expected to achieve the higher flow rates seen on immediately adjacent lands owned by other operators further north in the play. Details of the expanded drilling programme will be provided in conjunction with Molopo’s revised 2012 budget which will be released in late April.

The Company considers this purchase, which includes the 22 percent working interest in the three horizontal wells already drilled, to be a valuable strategic acquisition at a very competitive price. The most recent University of Texas land sale in March 2012 had limited land available near Molopo’s Fiesta acreage, however quarter and half sections of land approximately 20 miles to the north west were sold with prices between $1,000 and $2,700 per acre. Larger tracts of prospective land closer to Molopo sold for up to $3,900 per acre in the September 2011 University land sale.

Molopo’s CEO and Managing Director, Tim Granger, commented, "We are very excited to have been able to make this material increase to our highly prospective Wolfcamp equity position. With 100 percent interest in these lands, the Company is well placed to develop these assets at a pace which reflects its strong capital structure."