CALGARY, Feb. 23, 2017 /CNW/ - Montana Exploration Corp.
("Montana Exploration" or the "Company") (TSXV: MTZ)
today announced that it has entered into an agreement (the
"Farm-out Agreement") with a private US-based family office
group (the "Farmee") pursuant to which the Farmee will fund
up to US$20 million in drilling costs
in the Company's Montana oil and gas prospects (the
"Participation").
Farm-out Agreement
Funds committed by the Farmee under the Farm-out Agreement will
be applied primarily to drill new wells following up on the success
of the Company's recently completed five well Shaunavon oil drilling program with Rioco Ltd.
and to meet Montana Exploration's commitment to drill 10 wells
(including a minimum of six gas wells) on the Company's farm-in
acreage with a large Montana-based utility (the
"Utility"). Pursuant to the terms of the Farm-out
Agreement, the Farmee has committed a minimum of US$5 million for the first stage of a potential
four stage drilling program. US$5
million must be invested by the Farmee in each stage to earn
12.5% of the Company's pre-farmout working interests, excluding
wells drilled and facilities in place at the effective date of the
Participation, and subject to the rights of the Utility and the
farm-in rights of Rioco Ltd.. Determined on a drilled well by
well basis, the Farmee will earn 100% of Montana Exploration's net
interest prior to payout and 50% after payout, subject to Montana
Exploration's right to participate for 25% of its original net
interest in each well. Montana Exploration will be the operator
subject to the direction of a joint operating committee of Montana
Exploration and the Farmee.
The obligations of Montana Exploration and the Farmee under the
Farm-out Agreement are subject to the approval of the TSX Venture
Exchange and all other third party or regulatory approvals as may
be required.
Montana Exploration has now identified 36 Shaunavon oil
prospects and 23 gas prospects (on seven potential horizons
excluding potential in the shallow Eagle and Judith River formations) on over almost 400,000
acres of land held by Montana directly and through its farm-in with
the Utility based upon partial interpretation of 315 square miles
of 3D seismic. Proposed targets for the new drilling program
with the Farmee may include up to 50 new wells with the objective
of developing reserves and production associated with the Company's
recent drilling success, pursuing look-a-like oil objectives and
drilling new gas targets.
The economics of the Company's proposed drilling program with
the Farmee for both gas and oil are compelling. The last five
wells were drilled and cased in the Shaunavon at an average depth of 4,000 feet
for an average cost of US$375,000. The completed and equipped cost
of the new oil wells averaged under US$475,000. The wells are projected to pay
out in less than one year. Through economies of scale,
Montana Exploration expects to significantly improve upon present
net revenues to the Company of $28
per barrel for an average 20 API crude after transportation costs,
royalties, quality adjustments and field operating costs.
Montana Exploration has reviewed the production histories of
substantially all of the Shaunavon
oil wells in the region. Initial type curve production for
average stimulated Upper Shaunavon wells in the region is between
35 and 70 bopd and "estimated ultimate recoveries" per well are
expected to be between 100,000 and 180,000 bbls.
"The Farm-out Agreement represents a significant step in the
Company's ongoing financing and development plan, bringing in
quality partners and significant new capital that will primarily go
into the ground to enhance the value and cash flow of the Company
while minimizing dilution to existing shareholders," said
Charles V. Selby, Chairman and Chief
Executive Officer.
Recent Drilling Results
Montana has now initiated oil production on two of the wells
drilled in the recent five well conventional vertical drilling
program with Rioco Ltd. at a combined initial gross rate of
approximately 130 bopd without acid stimulation. A third well
is expected to be completed as an oil well in the near future and a
fourth well is expected to be completed as a gas well in
conjunction with a proposed program to bring some of the Company's
shut-in gas production back into production. The Company's
recent drilling results are significant in that Montana Exploration
has now drilled four oil wells over an area including four
townships (144 square miles) encountering 100% oil and no observed
oil water contacts to date in the prospects drilled in the Upper
Shaunavon. Montana Exploration is using a conservative
approach to completion and production procedures to confirm the
pervasiveness of oil in the Upper Shaunavon and budgeted low costs
of drilling and operations.
ABOUT MONTANA EXPLORATION CORP.
Montana Exploration Corp. is an oil and gas exploration and
production company focusing on the Shaunavon oil and Eagle gas opportunities
underlying its extensive land holdings and drilling rights in the
State of Montana. In the United States, the company operates
through its wholly-owned subsidiary, Montana Land & Exploration, Inc. The
Company's common shares are listed on the TSX Venture Exchange
under the trading symbol "MTZ". Additional information regarding
the company is available at www.SEDAR.com or at
www.MontanaExplorationCorp.com.
Resources
There is no certainty that any
portion of the resources referenced in this press release will be
discovered. If discovered, there is no certainty that it will be
commercially viable to produce any portion of the
resources.
Forward-looking Statements
This press release
contains statements that constitute "forward-looking information"
or "forward-looking" statements" (collectively "forward-looking
information") within the meaning of applicable securities
legislation. Forward-looking information is often, but not always,
identified by the use of words such as "anticipate", believe",
"expect", "plan", "intend", "forecast", "target", "project",
guidance", "may", "will", "should" "could", "estimate", "predict"
or similar words suggesting future outcomes or language suggesting
an outlook.
This press release contains forward-looking information
including, but not being limited to the number of wells to be
drilled under the Farm-out Agreement, the total drilling program
cost, the estimated costs of wells drilled under the Participation,
the projected payout term for existing wells and the economics of
the Company's oil prospects and current production generally.
Statements referring to reserves or resources are by their very
nature forward-looking information. Statements in this press
release relating to reserves and resources involve the implied
assessment, based on certain estimates and assumptions that the
described reserves and resources, as the case may be, exist in the
quantities predicted or estimated, and can be profitably produced
in the future. There is no certainty that it will be commercially
viable to produce any portion of such prospective resources. Other
assumptions and qualifications relating to drilling schedules,
costs and other matters are inherent in these estimates.
Forward-looking statements and information contained in this
press release are based on our current beliefs as well as
assumptions made by, and information currently available to, us.
Although we consider these assumptions to be reasonable based on
information currently available to us, they may prove to be
incorrect.
By their very nature, the forward-looking statements included in
this press release involve inherent risks and uncertainties, both
general and specific, and risks that predictions, forecasts,
projections and other forward-looking statements will not be
achieved. We caution readers not to place undue reliance on these
statements as a number of important factors could cause the actual
results to differ materially from the beliefs, plans, objectives,
expectations and anticipations, estimates and intentions expressed
in such forward-looking statements.
Furthermore, the forward- looking statements contained in this
press release are made as of the date of this document and we do
not undertake any obligation to update publicly or to revise any of
the included forward- looking statements, whether as a result of
new information, future events or otherwise, except as required by
applicable law. The forward-looking statements contained in this
press release are expressly qualified by this cautionary
statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Montana Exploration Corp.