Osborn
In September 2006, we announced an agreement to acquire 45% of the acreage, producing properties and natural gas gathering and treating system currently held by W. B. Osborn Oil & Gas Operations, Ltd. ("WBO") and St. Jo Pipeline Limited within the St. Jo Ridge (Barnett Shale) Field, located in Montague and Cooke Counties, Texas.
Upon closing, the effective date of the transaction is June 1, 2006. WBO will remain the operator.
Terms of the purchase are:
Purchase price of $18,450,000, before closing adjustments, to be paid in cash. The adjustments will be determined from time to time as production flows and drilling investments are accounted for by the parties. As part of the transaction, Ignis will commit to invest capital into an ongoing continuous drilling program as well as invest up to $5,000,000 in future property acquisitions within an Area of Mutual Interest.
Ignis will acquire forty-five percent (45%) of WBO's interests in 7,890 gross acres (6,864 net acres), 13 producing wells, and an estimated total net proved reserves of 1.4 million barrels of oil equivalent (Mboe) of which 0.5 Mboe are proved developed producing as of June 1, 2006. Approximately fifty percent (50%) of the proved reserves are oil and fifty percent (50%) are a combination of gas and gas liquids. The gathering and treating system consists of a 100% interest in approximately 24 miles of gathering lines, which accumulates and treats natural gas at a central plant.
WBO has identified 36 initial drilling locations on the acreage before beginning the infill drilling program, which could yield more than 100 additional drilling sites. A Pioneer Drilling Company rig, secured under a 12-month renewable contract, is currently being used to carry out the continuous drilling program.
Our partner in this project, W. B. Osborn Oil & Gas Operations, a private San Antonio, Texas based company, has a long history of developing and producing oil and gas. We believe the Ignis team will bring additional seasoned expertise and advancements in new technology to enhance recovery from the project, working alongside our partner.
Please see our Operations Update of June 1, 2007 for the latest information.
