TIDMHNR
RNS Number : 3751K
Highlands Natural Resources PLC
06 July 2017
6 July 2017
Highlands Natural Resources plc ("Highlands" or "the
Company")
Execution of Third Party Financing Agreement for East Denver
Project Drill Programme
Highlands, the London-listed natural resources company, is
pleased to announce the execution of a joint development agreement
(the "Agreement") with Raisa II, LLC, a leading US private oil and
gas investment company ("Investor"), which will fund up to US$32.65
million in drilling costs for Highlands' drilling programme of up
to 24 wells at its East Denver Niobrara shale oil and gas project
in Colorado (the "East Denver Project"). This financing is in line
with the Company's strategy to evaluate all funding options for the
East Denver Project with a view to commence the drilling programme
in the summer of 2017.
Highlights:
-- Immediate cash payment to Highlands of US$776,000
-- Designed as long-term financing partnership with Investor
funding 28.75% of the first 10 wells and 25% of all subsequent
wells at East Denver
o Equates to total funding of up to US$32.65 million based on
development programme of up to 24 wells assuming US$5 million per
well
-- Highlands receives a pro rata "carried interest" of 15% on
Investor's capital for the first 10 wells
o Investor funds 28.75% of costs in exchange for a 25% working
interest
o Highlands keeps the remaining 75% interest in the wells
o Additional permitting is progressing with a view towards
enlarging the drilling potential in the near term
-- Transaction may be a catalyst for additional potential
financings, where negotiations are well-advanced
-- Highlands' operational team has prepared the East Denver
Project for drilling activity this summer
Highlands' Chairman and CEO Robert Price said, "This is a major
financing milestone for Highlands. In light of East Denver's
compelling economic and operational opportunity, Highlands is
pleased to move the project forward.
"We look forward to partnering with a highly experienced
investor in the US energy industry, specifically focused in the
development of shale resource plays such as the East Denver
Project. In particular, our Investor has a track record of
investment in Colorado and specifically the Niobrara formation of
the Denver Julesburg Basin. We view the Agreement as a recognition
of the value potential of our project, which is now 'drill bit
ready' from an operational standpoint. Moreover, our Investor will
not only contribute financially but also technically, as we focus
on creating value and achieving near-term cash flows while
developing the project in an efficient, safe and environmentally
responsible manner. The Directors look forward to building a
long-term and mutually beneficial relationship as we progress this
exciting project together.
"Moving ahead, Highlands maintains significant funding
flexibility and we are in advanced negotiations with additional US
based oil and gas investment institutions. We believe that today's
Agreement positions Highlands for a favorable second half of 2017,
and I look forward to updating the market with additional
milestones in due course. Highlands views the Agreement as a
significant step forward in the development of the East Denver
Project, and a further validation of the significant value
potential of the Project by some of the most experienced investment
professionals in the US energy industry."
Highlands will assign a 25% working interest in the East Denver
project to the Investor, including a 25% assignment of the section
15 lease and a 25% interest in any wellbore interests earned under
the East Denver farm-in agreements. Further, the Agreement includes
an Area of Mutual Interest (AMI) surrounding and including the
current East Denver Project lands, wherein the Investor will have
the option to fund 25% of any future land acquisitions.
Consistent with Highlands' earlier farm-in agreements, the
Company has agreed to commence drilling operations by no later than
1 September 2017 and to continue drilling with no more than 60 days
passing between the release of a rig from one well to the
commencement of drilling at a subsequent well. Highlands has also
agreed to permit the maximum number of wells throughout the
Project, to finalize the unitization and other typical proceedings
currently in-process with the Colorado Oil and Gas Conservation
Commission (COGCC) with an aim to drill 14 or more wells by the end
of 2018. Additionally, the Agreement creates a joint technical
committee for evaluation and decision making in regards to
technical matters concerning the East Denver Project; Highlands is
pleased to gain the technical insights offered by our Investor's
experienced staff, who bring significant backgrounds in operations,
geology, engineering and geophysics.
The combination of an immediate cash payment, pro rata carried
interest and cost-sharing is a significant step towards fully
funding the East Denver Project and Highlands is in advanced
negotiations with other potential funding partners.
Looking ahead, the East Denver project is operationally advanced
and ready to commence drilling. The first surface location has been
built, and all permits and contractor relationships are in place
for the first four wells. Additional permitting is progressing with
a view towards enlarging the drilling potential of the East Denver
Project in the near term.
THIS RELEASE CONTAINS INSIDE INFORMATION.
**ENDS**
For further information, please visit www.highlandsnr.com, or
contact:
Highlands Natural +1 (0) 303 322
Robert Price Resources plc 1066
Cenkos Securities +44 (0) 131 220
Nick Tulloch plc 9772
+44 (0) 131 220
9771 /
Cenkos Securities +44 (0) 207 397
Neil McDonald plc 1953
St Brides Partners +44 (0) 20 7236
Lottie Brocklehurst Ltd 1177
St Brides Partners +44 (0) 20 7236
Hugo de Salis Ltd 1177
Notes to Editors
Highlands (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:
-- East Denver Niobrara: a farm-in opportunity for horizontal
oil and gas wells targeting the Niobrara shale formation in a
well-studied area of the Denver Julesburg Basin.
-- DT Ultravert: a re-fracking and parent well protection
technology with one patent granted and additional 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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