The Board of Golden Gate Petroleum Ltd is pleased to announce that it has entered into a participation agreement for up to a 10% working interest in a 40+ horizontal development well project in the Eagle Ford Trend, Texas. The new project covers approximately 3,400 acres in the oil window of the Eagle Ford Trend.
The operator and prospect promoter estimate resource potential of 15 million barrels of oil equivalent (BOE) gross (net to GGP approximately 1.5 million barrels) for the leasehold position. The leases have terms and conditions typical of the Eagle Ford play. The depth of the Eagle Ford Shale in this area is around 8,200 feet with a shale thickness of approximately 175 feet.
There are around 42 potential drilling locations on 80 acre spacing. Well costs are estimated at US$7.5 million with a drilling time of three weeks. The lateral length of the horizontal wells is planned for 4,500 feet and is expected to contain 12 to 16 frac stages. Initial production rates range from 600 BOE per day to 1,300 BOE per day. Estimated ultimate recovery per well is in a 362M BOE to 500M BOE range.
GGP will be paying its proportionate share of all costs plus a two or three well promote (approximately 11.1% for a 10% working interest). Currently, GGP has a 5% working interest with an option to add another 5% working interest by 30 April, 2012. The total estimated commitment to the project (paying 11.1% for a 10% working interest) including planned drilling over the next year is US$3.4 million. Drilling activity is expected to begin within the next month.
Next to the Permian Basin, the Eagle Ford Shale Play in the Western Gulf Basin is considered the most exciting development opportunity in Texas. This acreage sandwiched between very large drilling programs by Rosetta and Anadarko is viewed as prime Eagle Ford. The cost of added acreage seen in the Permian Basin significantly exceeds the deal terms achieved with this Eagle Ford project.
In addition, the project provides GGP the opportunity to diversify its project base with a second development program in a highly attractive and successful area in North America. It will lower the Company’s overall risks with more focus on cash flows out of development versus exploration. It also allows us to fully understand both areas of development so as to cross pollenate the latest technologies.