Petro One Closes Deal with Senior Oil Company

Source: 5/21/2013, Location: North America

Petro One Energy Corp. is pleased to report it has completed a transaction with a senior oil company on its J11 property totaling 64.75 ha or 160 acres in the Hardy Minton area of southeastern Saskatchewan. Under the terms of the agreement, Petro One is to receive $105,000.00 cash and a 7.5% GORR on all future oil production, surface to basement, for its working interest in the property. Petro One maintains excellent exposure to this play both with the closing of this transaction and by retaining a 100% interest in the J12, 13, 19 and 28 properties, all located in the same immediate area and totaling more than 711 ha or 1700 acres in size.

Minton, Saskatchewan Red River / Bakken Properties

The recent discovery of oil in the Bakken in Minton has generated a new play in this area, which was already known for its prolific Red River oil producers. One of the best Red River wells in the Minton Hardy South area is within 150 metres of J19 and several new horizontal wells are now targeting oil in the Bakken formation adjacent to Petro One’s properties.

A Red River well located only 150 meters north of J19 had an IP of 300 bopd with cumulative production of 212,180 bbl to date. Another Red River well located just 185 meters east of J11 has produced 255,647 bbl to date, and there is another Red River producer located only 195 meters east of J28 with an IP of 379 bopd and cumulative production of 164,655 bbl to date. The J12 property has a Red River producer just 185 meters to the west, and J13 has strong Red River producers both to thenorth and east with 3 month initial production of up to 599 bopd, and total production to date of 234,298 bbl. Sample cuttings from one of these Red River producers also confirmed the presence of oil in the Bakken.

The best Red River well in the area had an IP of 926 bopd, has produced 2.25 million bbl to date, and remains in production. A strong Bakken well terminates only 250 metres from the J19 property, and had a 3 month IP of 109 bopd. The Red River and Bakken production from these surrounding wells confirms the strong dual-zone potential of the J11 parcel as well as Petro One’s 100% owned J12, 13, 19 and 28 properties.

Petro One’s technical team continues to evaluate and compile data on its properties in preparation for farmouts, joint ventures, and partnerships. Based on the discovery of Bakken oil at Minton, Viking oil at Milton, Frobisher oil at Bromhead, and Rosebank, and strong supporting data from its otherproperties, the technical team is confident that its Saskatchewan and Manitoba assets will continue to provide additional oil discoveries.

“The Company is pleased to have completed its second deal with a senior oil company, and plans to continue building oil production through the drill bit” said Petro One’s President, Peter Bryant. “This agreement with a company of this calibre is another strong endorsement of the Company’s assets. The Company is very pleased with the excellent oil production on the Bromhead farm-out lands. Petro One's partner on that property has indicated an intention to drill up to two additional horizontal wells that would provide additional cash flow and reserves to Petro One without capital outlay. The J10 Bromhead farm-out land has substantially increased Petro One’s cash flow and oil production, and will add significantly to the Company’s reserve base. Petro One will release the initial reserve status for Bromhead when it becomes available.

Based on results from the first well on the Bromhead farm-out lands, seismic and geological evidence indicate that several additional horizontal development wells are justified on Petro One's 100% owned J10 Bromhead land totaling more than 194 hectares (485 acres). In addition, the Upper Viking on Petro One's J5 Milton property is now considered an excellent target for horizontal drilling as an examination of drill core has confirmed the presence of oil throughout the formation providing for significant reserve potential. The Upper Viking zone has the potential to deliver good volumes of water-free oil and add significant light oil reserves using the same horizontal drilling techniques that are working very successfully for other producers in the area. The company is in ongoing discussions with several interested parties on many of its assets. Following this model, the Company will work with its partners to exploit the full potential of the Company’s 14 oil properties in Saskatchewan and Manitoba that have a total area of 14.65 sections (3,750 hectares 9,376 acres.)”

To facilitate the sale of J11, the Company has negotiated a reduction of the underlying royalty on J11. Prior to the reduction, there was a “royalty holiday” in respect of production from the first well drilled on J11 and a “sliding scale” royalty thereafter, subject to a 10% minimum. Under the new arrangement the royalty payable to the underlying royalty holders has been reduced to 5% (i.e. 2/3 of the 7.5% GORR), the Company will be entitled to the other 2.5% (i.e. 1/3 of the 7.5% GORR) and the royalty holiday has been eliminated.

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