AMERICAN PATRIOT TO ACQUIRE NEW TEXAS ASSET, FURTHER INCREASING PROVEN RESERVES
South Texas acquisition increases company reserves to 2.3 million barrels of oil equivalent, which generates ~US$80m in revenue at US$50 oil
Letter of Intent signed and engineering due diligence completed; transaction expected to close mid-January
American Patriot on track to exit 2017 producing 500 barrels of oil equivalent per day
Further transformation in store for 2018, with transactions in pipeline that will triple production and reserves
American Patriot Oil and Gas Ltd (ASX:AOW) (“American Patriot” or “the Company”) has signed a Letter of Intent (LOI) to acquire an additional conventional oil and gas asset in South Texas, currently producing 40 barrels of oil a day (boepd) and 374 mcfd of gas (102 boepd) and possessing significant upside potential. The asset contains 430,000 boe proven oil and gas 1P reserves certified by independent reserve reports. These reserves have been acquired for US$1.2 million and are estimated to have the potential to generate more than US$15 million in revenue for American Patriot. The reserve study has been conservatively valued at US$50/bbl verses current market prices of US$55/bbl
American Patriot is acquiring the field from private oil and gas company, HJH Resources LLC, in a private, off-market transaction expected to close mid-January 2018. Engineering due diligence has been completed, while land title and environmental due diligence remains to be carried out. The asset consists of 38 Austin Chalk producing wells on 43 leases and requires minimal workover expenditure to significantly increase production. American Patriot will operate this asset, with the existing owner assisting with this process during the transition period.
The existing infrastructure is complete and in good working order consisting of pump jacks, tanks and batteries, with ready access to market through gas pipeline and delivery to nearby refineries. Operating costs in this region are approximately US$23/bbl, ensuring the wells are economic at low oil prices.
As with American Patriot’s other recent acquisitions, the Company sees substantial opportunity to lower the Lease Operating Expenses and achieve further cost efficiencies.
Significant resource potential of over 50 million barrels of oil
American Patriot has a 21.5% working interest in the Northern Star Project which covers 61,489 acres in the north-east of Montana, up dip and surrounding the Lustre Oil Field.
Partnered with Great Western (Operator) and Anadarko Minerals.
61,489 acres gross, 12,600 net acres to American Patriot (25% average working interest)
The surrounding Lustre Oil Field was discovered by Exxon Corporation in 1982, and produced over 7.5 million barrels of oil from the Ratcliffe and Mission Canyon zones.
Free carried on 2 horizontal exploration wells (no cost caps), plus back-in right on another 2 well option.
A 3D seismic survey has been conducted on the neighbouring Lustre and Midfork oil fields.
Excellent oil shows were encountered in a previous well.
Planning is currently underway for a second horizontal well, which we are free carried on.
Lower permeability rocks around and up-dip of the old field sweet spot suggests that horizontal drilling can be utilized to target significant resource and value potential.
Expected IP is 250 to 500 barrels of oil per day (BOPD).
ROUGH HOUSE PROJECT
Conventional oil play. Drilling in Q1 2017 targeting 200+ BOPD per well – free carried.
American Patriot has a 30% working interest in the Rough House Project which covers 24,221 gross acres in the DJ Basin across the Washington, Lincoln Arapahoe and Elbert Counties in Colorado.
Rough House is a conventional oil play focussed on stacked pays with multiple carbonate reservoir targets.
A farm out was struck in February 2016 with Running Foxes Petroleum, a leading Colorado oil company who discovered the Arikaree Creek oil field – a 1,400 BOPD field.
The Running Foxes farm out deal was a 5 well deal, which will involve economic low cost conventional drilling.
There are two commitment wells of which American Patriot is free carried, plus a 3 well option.
The first two wells will be development wells will be next to the Arikaree Creek Field.
Running Foxes has significant on ground operational and development expertise in Colorado, owning its own drill rig fleet and workover units.
The acreage is in close proximity to recent oil producing discoveries which have quick paybacks and nearby active leasing:
Nighthawk Energy: 300-400 BOPD from 4 wells, currently approximately 1,500 BOPD total production from the Arikaree Creek Oil field.
Wiepking Fullerton: 184,00 net acres, 3 wells were drilled recording between 694 and 1,600 BOPD
Includes a vertical drilling opportunity to around 11,000 feet, with large upside potential.
There is potential for future JV opportunities with Running Foxes in an Area of Mutual Interest which has been established.
American Patriot owns a 100% Working Interest in the Panther project covering 12,430 Gross Acres, (10,293 Net Acres) in the Blood Creek Syncline in Garfield County, Central Montana.
Large position on a well control defined structural nose
Located on the flanks of an oil rich basin close to producers/infrastructure
Vertical drilling opportunity with upside and potential to turn to horizontal oil play
Low cost of entry and could represent significant upside in the event of success (as a result of being a first mover in the basin).
Exploration plan is acquire seismic, farm down for free carry on well. American Patriot is presently seeking to identify appropriate partners, who are willing to enter into a farm down arrangement for the project. American Patriot is targeting technically sound operators with experience in the basin.
The basin is well served by infrastructure with ready access to drill rigs and service companies. Vertical well costs in this project are estimated to be approximately $1,200,000 (fractured and stimulated).These projects are in the early exploration phase and no commercial discoveries have been drilled on or adjacent to the proposed project areas.
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