Samson Oil and Gas USA Inc (a wholly owned subsidiary of Samson
Oil and Gas Limited (ASX: SSN; NYSE MKT: SSN)) (Samson) has entered
into a contract to acquire a parcel of oil and gas leases,
producing oil and gas wells, currently shut-in wells and associated
facilities in North Dakota and Montana for a cash price of $16.5
million.
The properties to be acquired produce approximately 720 BOPD
from 41 net producing wells.
Netherland Sewell & Associates have estimated that the
properties contain Proved Reserves of 8.5 million barrels with a
Net Present Value of $84.9 million, as at October 1st 2015, the
effective date of the transaction.
Oil
(MBBL) Gas (MMCF) NPV10
(M$) Proved Developed Producing (PDP) 1,712.7
808.0 22,166.7 Proved Developed Non-producing (PDNP)
413.8 730.6 2,902.0 Proved Undeveloped (PUD)
6,394.5 4,476.1 59,914.9 Total Proved 8,521.0
6,014.7 84,983.6
Oil pricing used in this estimate represents NYMEX WTI prices as
at October 1st, adjusted for quality, transportation fees, and
market differentials. Gas pricing is based on NYMEX Henry Hub
prices as at October 1st, adjusted for energy content,
transportation fees, and market differentials. Prices, before
adjustments, are as follows:
Period Ending
Oil Price ($/Barrel)
Gas Price ($/MMBTU) December 2015 46.97
2.79 December 2016 51.07 2.95 December 2017
54.49 3.11 December 2018 56.24 3.18 December
2019 58.12 3.25 Thereafter 59.53 3.35
As is customary for transactions of this nature, the reserve
report was completed as at the effective date of the transaction,
and therefore follows the future prices of oil and gas determined
as at that date. However, the oil price continues to be volatile
and has depreciated since the effective date. Samson has run a more
current price strip which drops the WTI oil price by between $6 and
$10 per barrel compared to the reserve report. This reduces the PDP
to $15.5 million, the PDNP to $1 million, the PUD to $35 million
and the total proved reserve to $51 million. It is important to
note that these estimates are internal and do not constitute a
formal reserve report.
To be able to designate a PUD reserve, Samson has tested whether
it will have the capacity to fund the drilling of these wells.
Samson’s internal cash flow analysis determines that the PUD value
can be funded and the wells drilled in a 5 year time frame, as
required by the US regulatory regime.
The 51,305 net acres of petroleum leases being acquired include
the right to exploit hydrocarbons down to the top of the Bakken
Formation. For a portion of the leases, Samson is also acquiring
the rights to the deeper geologic section below the Bakken
pool.
The transaction is conditional, amongst other things, on Samson
being able to use its existing $50 million debt facility which has
a current borrowing base of $19 million. Closing is expected
February 1st, subject to the completion of due diligence and
financing approval.
The properties have been in production for several years and
represent production from various geologic horizons above the
Bakken Formation, including the Ratcliffe and Mission Canyon
intervals of the Mississippian Madison Formation which provide
conventional oil and gas accumulations in this region. The
properties have largely been developed using 640 acre horizontal
wells or 40 acre vertical wells. With the current lower oil service
costs, Samson envisages development of the acquired PUD Reserves by
using longer laterals, infilling the historical 640 acre wells or
developing 40 acre infills adjacent to existing or known
production.
Samson’s immediate focus, however, will be on the 17 wells in
the PDNP category, since the Company expects that these wells can
be bought back on line with minimal capital expenditure. Samson
also sees additional upside using an acid-based stimulation of the
existing PDP and PDNP wells in light of the reservoir’s calcium
carbonate-based architecture. No stimulation of these reservoirs
has ever been undertaken but this style of stimulation treatment
has resulted in a 3 to 4-fold uplift in production rates in other
wells in the region.
Samson believes that the larger upside in the acquired
properties resides in the PUD category, which will be realized
through infill drilling development.
The transaction also includes the acquisition of two saltwater
disposal facilities and the right to use existing disposal
facilities at a prescribed rate per barrel. Certainty on that
significant operating cost has thus been achieved as part of the
transaction.
Samson’s Ordinary Shares are traded on the Australian Securities
Exchange under the symbol "SSN." Samson's American Depository
Shares (ADSs) are traded on the New York Stock Exchange MKT under
the symbol "SSN." Each ADS represents 200 fully paid Ordinary
Shares of Samson. Samson has a total of 2,837 million Ordinary
Shares outstanding (including 230 million options exercisable at
AUD 3.8 cents), which would be the equivalent of 14.185 million
ADSs. Accordingly, based on the NYSE MKT closing price of US$0.39
per ADS on December 31st, 2015, the Company has a current market
capitalization of approximately US$5.6 million (the options have
been valued at an exchange rate of 0.7306). Correspondingly, based
on the ASX closing price of A$0.003 for ordinary shares and a
closing price of A$0.001 for the 2017 options, on December 31st,
2015, the Company has a current market capitalization of
approximately A$7.3 million.
SAMSON OIL & GAS LIMITED
TERRY BARRManaging Director
Statements made in this press release that are not historical
facts may be forward-looking statements, including but not limited
to statements using words like “may,” “believe,” “expect,”
“anticipate,” “should” or “will.” Actual results may differ
materially from those projected in any forward-looking statement.
There are a number of important factors that could cause actual
results to differ materially from those anticipated or estimated by
any forward-looking information, including uncertainties inherent
in estimating the methods, timing and results of exploration
activities. A description of the risks and uncertainties that are
generally attendant to Samson and its industry, as well as other
factors that could affect Samson’s financial results, are included
in the prospectus and prospectus supplement for its recent Rights
Offering as well as the Company's report to the U.S. Securities and
Exchange Commission on Form 10-K, which are available at
www.sec.gov/edgar/searchedgar/webusers.htm.
Competent Person’s
Statement
The reserves quoted in this announcement were estimated by
Netherland Sewell & Associates, an independent petroleum
reserves engineering consulting firm based on the definitions and
disclosures guidelines contained in the Society of Petroleum
Engineers, World Petroleum Council, American Association of
Petroleum Geologists and Society of Petroleum Evaluation Engineers
Petroleum Resources Management Systems.
Information contained in this announcement relating to
hydrocarbon reserves was compiled by the Managing Director of
Samson Oil & Gas Ltd., T M Barr a geologist who holds an
Associateship in Applied Geology and is a fellow of the Australian
Institute of Mining and Metallurgy who has 35 years’ relevant
experience in the oil & gas industry.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160105006795/en/
Samson Oil & Gas LimitedTerry Barr, CEO, 303-296-3994
(US office)