HILLCREST SIGNS LETTER OF INTENT FOR ONSHORE LOUISIANA
Hillcrest Petroleum to acquire 75% of Louisiana project
2016-07-11 10:07 ET - News Release
Mr. Donald Currie reports
HILLCREST SIGNS LETTER OF INTENT FOR ONSHORE LOUISIANA DEVELOPMENT
Hillcrest Petroleum Ltd. has signed a letter of intent with an arm's-length vendor whereby the company will have the right to earn a 75-per-cent working interest in 6,200 acres located in the state of Louisiana. The acreage is within a well-established hydrocarbon producing area, and interpretation of existing technical data indicate that there are in excess of 60 potential development drilling locations contained within the project area.
The terms of the LOI are as follows:
- The company has agreed to undertake an initial six-well development drilling program with a maximum commitment of $3-million (U.S.). The company will progressively earn a 75-per-cent working interest in 80-acre well spacing units associated with each well drilled in the initial program.
- The company may, at its sole discretion, continue drilling to earn a 75-per-cent working interest in the entire project area by drilling a total of 10 wells, including the six wells from the initial program. After 10 wells are drilled, or when further development drilling in the project area is deemed to be self-financing from project production revenue, the company will finance its working interest share of 75 per cent of the cost of additional development wells.
- The company will pay the vendor a cash acreage payment for each well drilled in the project area.
- The company and vendor will negotiate a bonus to be paid in common shares of Hillcrest for each barrel of oil reserves incrementally added to the proved, developed producing category.
The parties have agreed to negotiate in good faith to enter into a definitive agreement which will supersede the terms of the LOI upon its execution. This transaction is subject to TSX Venture Exchange approval.
"Hillcrest has evaluated and made offers on numerous asset acquisition opportunities over the past 18 months, and we are pleased to have now secured the right to develop an asset in an area such as this in a prolific hydrocarbon province while taking advantage of cyclically low project development costs," Don Currie, Hillcrest Petroleum chief executive officer, states. "The acreage being obtained as well as surrounding fields have successfully produced oil and gas for decades, and are expected to continue to produce through the application of improved drilling and completion techniques, further development and infill drilling. The deal, as structured, allows Hillcrest to drill and develop the acreage at a reasonable pace, and, if successful, will add substantial production and reserves value to our currently undervalued company. We are proceeding with evaluations of additional opportunities that we believe will add substantial value to the portfolio when captured."