Further Farm-in Agreement In East Denver Project
16 December 2016
Highlands Natural Resources plc ('Highlands' or 'the Company')
Further Farm-in Agreement In East Denver Oil & Gas Project
Highlands, the London-listed natural resources company, announces that through a wholly owned subsidiary it has executed a farm-in agreement ('Agreement') to increase the size of Highland's existing East Denver oil and gas project in Arapahoe County, Colorado. The new farm-in enables drilling on three additional sections (each section being a 640-acre parcel) directly offsetting the original three sections that Highlands farmed into from Renegade Oil and Gas Company, LLC in July 2016. The new acreage to which Highlands has farmed in is currently owned by a US incorporated and NYSE traded oil and gas company (the 'Farmor'). The Farmor has diversified and integrated operations in over 20 countries and has a market capitalization in excess of $50 billion.
Subject to the completion of on-going permitting and spacing applications, Highlands will now be able to drill "extended lateral" horizontal wells in the Niobrara Shale on two-section spacing units. These horizontal wells will be approximately 9,000 feet in lateral length.
The Farmor maintains preferential rights to purchase Highlands' farm-in interest. In the event that Highlands wishes to sell part or all of its interest in the East Denver Project and receives a bona fide offer, the Farmor will have 15 days to notify Highlands of its election to purchase the interest under the same price and terms as the bona fide offer.
The Agreement requires Highlands to drill six extended horizontal wells, and to commence drilling the first well by 1 September 2017. The Company has committed to drill at least five additional wells at intervals of 60 days for the second well and 90 days for the third to sixth wells. Highlands secured this Agreement at no upfront cost although there is a non-performance fee which is limited to US$150,000 per well (maximum total penalty of US$900,000 if no wells are drilled).
The Agreement also provides Highlands with a Continuous Drilling Option through to 31 December 2018. This option, subject to certain approvals, allows Highlands to continue drilling horizontal wells on the farmed-in acreage as long as no more than 180 days pass from the completion of the sixth well to the commencement of the next well. Each additional well is also subject to an incremental 180-day window. Highlands anticipates that up to a total of 24 extended horizontal wells could be drilled on the enlarged East Denver project.
Highlands will bear the full cost of drilling, and earns ownership and control of wellbores after they are completed. On the (approximately 50%) portion of each horizontal well drilled under the Farmor's farm in acreage, Highlands will initially retain a 77% revenue interest in the wells and will bear 100% of operating costs. After a well "pays out" by returning all costs associated with drilling and operation to Highlands, the Farmor will have the option to take either an incremental 3% overriding royalty interest or convert its initial overriding royalty into a 50% working interest (such that the Farmor would bear 50% of operating costs and retain 50% of net revenues).
With this Agreement in place, Highlands intends to accelerate its on-going financing and partnership discussions to finalize a development plan for the East Denver project. Highlands will update the market on future developments in due course.
This announcement contains inside information.
**ENDS**
For further information, please visit www.highlandsnr.com, or contact:
|
Robert Price |
Highlands Natural Resources plc |
+1 (0) 303 322 1066 |
|
Nick Tulloch |
Cenkos Securities plc |
+44 (0) 131 220 9772 |
|
Neil McDonald |
Cenkos Securities plc |
+44 (0) 131 220 9771 / +44 (0) 207 397 1953 |
|
Lottie Brocklehurst |
St Brides Partners Ltd |
+44 (0) 20 7236 1177 |
|
Elisabeth Cowell |
St Brides Partners Ltd |
+44 (0) 20 7236 1177 |
Notes to Editors
Highlands Natural Resources (LSE: HNR.L) is a London-listed natural resources company with a portfolio of high-potential oil, gas and helium assets and technologies. The company's core projects include:
· DT Ultravert: a re-fracking and parent well protection technology with 20 patents pending in the United States and internationally. Highlands is advancing commercial conversations with a range of oil and gas operators to create revenue-sharing opportunities for DT Ultravert applications.
· Helios Two: a 105,000+ acre helium and natural gas prospect in SE Montana with drilling and assessment operations ongoing.
· East Denver Niobrara: a farm-in opportunity for extended horizontal oil and gas wells targeting the Niobrara shale formation in a well-studied area of the Denver Julesburg Basin.
This information is provided by RNS
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