Kodiak Oil & Gas acquires additional Vermillion Basin interests; sets US $30 million initial 2006 capital budget
Thursday March 16, 10:48 am ET
DENVER, March 16 /CNW/ - Kodiak Oil & Gas Corp. (TSX Venture: KOG; KOGGF.PK) today announced the acquisition of 10,629 gross (9,566 net) acres of mineral leasehold in Sweetwater County, Wyoming. The acreage, adjacent and contiguous to current Kodiak lands, is located in the Company's Pacific Rim project area and is part of the Vermillion Basin deep-gas play that Company geologists believe is prospective for the Baxter shale and Frontier and Dakota sandstones. Kodiak operates the properties.
The $6.9 million acquisition was from a private party, Chicken Creek LLC, and includes the undeveloped acreage as well as working interest (ranging from 33% to 90%) in four wells that have been drilled during the past two years to evaluate the natural gas potential of the Almond and Ericson formations. One well is producing from the Almond Formation and the remaining three wells are in various stages of completion in the Almond and Ericson. Further completion activity in the area will resume in the second quarter of 2006 when annual wildlife stipulations on federal lands are lifted.
After the acquisition, Kodiak has 45,137 gross (28,337 net) acres adjacent to the developing Vermillion Basin deep-gas play. The Company's working interest in the properties range from approximately 45% under 4,600 net acres to 90% under 12,000 net acres. Most of the Company's Vermillion Basin acreage position is on federal lands.
$30 Million 2006 Capital Expenditure Budget
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The Company also today announced its 2006 capital expenditure budget of US $30 million, not including the above announced Vermillion acquisition. By comparison, Kodiak's 2005 CAPEX was $14 million. Kodiak plans to fund the 2006 CAPEX from the proceeds of its recently announced private placement. Kodiak currently plans to participate in the drilling of 31 wells (15.24 net) in 2006. Approximately $16 million of the 2006 capital budget will fund drilling expenditures, gathering and processing infrastructure and certain acreage acquisitions in southwestern Wyoming. The balance of $14 million is allocated to Williston Basin, drilling and completion operations and infrastructure.
The amount and allocation of actual capital expenditures will depend upon a number of factors, including the impact of commodity prices, rig availability, variances in contract drilling and service costs, and changes in forecasted production. Potential producing property or acreage acquisitions are not included in the 2006 budget.
Management Comment
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Lynn Peterson, President and CEO of Kodiak Oil & Gas commented: "Kodiak is in the best position in its history. We have the capital to invest, the projects to drill and the technical talent necessary to actively explore and exploit our leasehold as we seek to establish reserves and grow production."
He added: "Our exploration program has a meaningful inventory of promising gas and oil projects in both of our core basins. One such project is the 2006 drilling of one or two wells to evaluate the potential of the deeper Baxter shale and Frontier sands. Our strategy combines exploration opportunities with a growing cash flow from development drilling in Wyoming. In North Dakota, we anticipate spudding a well on our Bakken acreage early in the second quarter. We expect to drill at least two wells here in 2006. Going forward, our large acreage positions in our core areas include projects of varying risk profile that we believe present attractive opportunities for Kodiak and its shareholders. I invite you to monitor our progress during what we expect to be a truly pivotal year for Kodiak."
About Kodiak Oil & Gas Corp.
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Kodiak Oil & Gas, headquartered in Denver, is an independent energy exploration and development company focused on exploring, developing and producing oil and natural gas in the Williston and Greater Green River Basins in the U.S. Rocky Mountains. The common shares of the Company are listed for trading on the TSX Venture Exchange under the symbol "KOG" and the U.S. symbol "KOGGF."
