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North American Petroleum (LSE:NAP) a company focused on developing its interests in proven US onshore oil and gas formations,has announced it has acquired a 24.2% interest in the producing Little Drum oil and gas project focused on the Mississippi Lime formation, in Osage County, Oklahoma. The acquisition increases the value of NAP’s proven reserves by 150% to US$16.764m and is in line with the Company’s strategy to rapidly build net production and reserves by acquiring and developing leases in liquids rich hydrocarbon plays.
Key Highlights:
– 24.2%/16.8% working/net revenue interest acquired in the Little Drum for a cash consideration of US$300,000
– Includes four producing wells: Sarah Elizabeth 1H-17#2; Little Drum 1H-16; West Little Drum 1H-17; Lauren Blaire 1H-18; and a salt water disposal well
– Current aggregate net production of 14 boepd attributable to NAP from Little Drum – payback of cost of acquisition is estimated at 10 months based on current WTI prices
– Proved (P1) reserves of 190 Mbbl oil and condensate and 519 MMcf natural gas for the Little Drum net to NAP with a PV10 of US$10.064m (based on CPR) – provides strong asset backing
– Significant potential production uplift of existing wells via low cost development work including fracture stimulation
– Fracture stimulation of West Little Drum resulted in 600% increase in gross oil production to a stabilised rate of 35 barrels of oil per day based on a 20 day-average from pre-frac levels – 6 bopd net to NAP
– Lauren Blaire well due to be fracture stimulated in the next few weeks
– Net leasehold position increased by 155 to 779 mineral acres in the Mississippi Lime formation
– US$300,000 cost of acquisition equates to US$1.08 per P1 barrel of reserves – compares favourably to average price for similar US onshore transactions
NAP’s Managing Director Stefan Olivier said, “Little Drum transforms NAP’s production and reserves profile, due to its existing production of 14 boepd and P1 reserves of 190 Mbbl of oil and condensate and 519 MMcf of natural gas. Based on existing production alone, we expect to recoup the cost of the Acquisition in less than twelve months and with low cost high impact development opportunities including the upcoming frac of the Lauren Blaire well, we are well placed to increase production in the near term. We now have interests in 22 wells, 14 of which are currently producing and, in line with our strategy revenues generated will be recycled into further drilling or acquiring additional leases. Furthermore, the value of our proved reserves has more than doubled to US$16.764m, based on just six out of the 14 producing wells, which further underpins our current market valuation of £2.9m.”
Further Information:
Little Drum is located on the producing Horizon Project in Osage County, Oklahoma in which AIM listed Northcote Energy (NCT) holds a 51.75% working interest (`WI’) and 41.246% net revenue interest (`NRI’). The company is acquiring from a third party a 24.1875%/16.85% working/net revenue interest in Little Drum which comprises four producing horizontal wells and a salt water disposal well. The four wells are the Sarah Elizabeth 1H-17#2; Little Drum 1H-16; West Little Drum 1H-17; and the Lauren Blaire 1H-18. The purchase price of US$300,000 equates to a cost per barrel of P1 reserves of US$1.08 per barrel of oil equivalent which compares favourably to similar transactions.
