Rocksource to Acquire Sandhawk Energy
Rocksource ASA and its US subsidiary Rocksource Energy Corporation have entered into an agreement to acquire 98% of Sandhawk Energy LLC for US $2.5 million. The acquisition is conditional on the satisfactory outcome of a due diligence of Sandhawk and final agreements between the parties.
This acquisition will give the Rocksource group access to exploration potential, discovered reserves and an increased share in existing production. The transaction will bring Rocksource`s aggregate working interest in New Ace Field to 92%, more than double the current interest. It will also bring the working interest in adjacent exploration acreage from the current 50% to 99%. Several drillable targets have been identified and a rig is being contracted to start drilling two wells beginning as early as November 2006. A further drilling program will be decided on in early 2007.
The acquisition will enable Rocksource to start its drilling campaign onshore US. The two first wells have the potential to increase the reserve base with approximately 5.2 million barrels of oil equivalent, of which approximately 4.0 is net to Rocksource. These reserves are expected to come on stream during 2007.
The acquired company, Sandhawk, is an oil and gas company registered in Texas, and has its primary operations in the New Ace Field in San Jacinto and Polk Counties, Texas.
Rocksource's subsidiary REC has lease ownership in several areas in the US, but currently REC only has production from New Ace Field with an average working interest of 37% before the transaction. Rocksource intends to use its new subsidiary Sandhawk as its operating company in this specific area onshore US.
Rocksource has established a strategy where onshore production US is one of three key elements. The other two are firstly electromagnetic (EM) technology driven exploration in Norway and UK, and secondly frontier exploration where EM technology can be leveraged.
This transaction will enable us to increase the pace in realizing the value present in our portfolio onshore US. Rocksource will continue to build a short-term cash flow onshore US while building a high impact exploration portfolio in the North Sea and in frontier areas. Building a company based on leading edge exploration technology is a long-term project. Our onshore portfolio in the US has the potential to generate cash flow in the short term to balance the portfolio.