Nice profit...pays for JMG
Press Release Source: Fellows Energy Ltd.
Fellows Energy Ltd. Enters into Agreement to Sell Oil and Gas Leases for $1.98 Million
Friday February 25, 10:03 am ET
Company Has Already Received $1 Million in Proceeds from Sale
BROOMFIELD, Colo.--(BUSINESS WIRE)--Feb. 25, 2005--Fellows Energy Ltd. (OTCBB: FLWE - News; "Fellows") announced today that it has entered into an agreement to sell certain oil and gas leases for $1.98 million. Half of the proceeds from the sale have already been received, with the other half due to be paid on or before March 15, 2005. The Company acquired the leases in October, 2004, for $425,000. Fellows will use the proceeds from the sale to pay down the loan received in connection with a joint venture agreement with JMG Exploration, Inc. ("JMG") to drill its Weston County and Gordon Creek projects, and for working capital purposes. Under the joint venture agreement, JMG will receive a 50% interest in the Weston County and Gordon Creek projects in exchange for expending $2,000,000 in exploration and drilling expenditures on the two projects during 2005. In addition, JMG advanced $1,500,000 to Fellows in the form of a bridge loan.
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The Weston County project is a 19,290-acre project on the east flank of the Powder River Basin. The Weston County project contains previously-identified drill locations based on extensive seismic evaluation targeting the Turner Formation, in near proximity to producing fields. In addition, the parties will target the nearby locations with potential in the Minnelusa and Dakota Formations.
JMG will also drill on the 5,242-acre Gordon Creek project, recently acquired by Fellows from The Houston Exploration Company (NYSE: THX - News). The Gordon Creek project is in an area of known coal resources in Carbon County in eastern Utah near other operating coal bed methane projects, such as the Drunkard's Wash Project, which Fellows' project personnel successfully drilled previously for River Gas Corporation.
"The short-term significant gain realized from the lease sale, and our joint venture with JMG, represent our ability to acquire and move forward with valuable projects in ways that are in addition to our own operations activities," said George Young, President of Fellows Energy. "We will continue to identify and acquire projects that enhance the value of our shareholders, and will continue our aggressive program of growth and development on our coal bed methane projects. We will also benefit greatly from the operating experience of JMG in conventional oil and gas drilling, and we look forward to getting into production in the near future with JMG on the Gordon Creek and Weston County projects."
About Fellows
Fellows combines a seasoned management team with exploration targets focusing on coal bed methane, shallow gas and low-risk oil and gas potential.
Fellows has interests in over 240,000 acres of oil, gas and coal bed methane rights. In addition to the Weston County and Gordon Creek projects described above, Fellows recently optioned the Overthrust project, comprising over 183,000 acres of oil, gas and coal bed methane leases in northeastern Utah and southwestern Wyoming. Fellows will test the three identified coal seams that run through much of the area. Previous drilling has included seven exploratory wells that identified multiple coal seams of Tertiary and Cretaceous age that appear to be prospective for coal bed methane. Some of these coals are of similar age and depositional condition to other productive coal bed methane fields.
Fellows also recently purchased the 10,678-acre Carter Creek Project in the southern Powder River Basin. Fellows plans to commence drilling in the near future at the Carter Creek Project, in which Fellows has a 100% working interest. Fellows believes Carter Creek hosts a low risk hydrocarbon project. Based on its analysis of the geologic structure of this region, Fellows expects to find productive sections in the Cretaceous, Niobrara, Turner (Frontier) and Mowry layers, in that several existing wells in the Carter Creek area currently produce oil.
Fellows recently completed its option under an Exploration Services Funding Agreement with Thomasson Partner Associates, Inc. of Denver, Colorado under which it will continue with project evaluation and acquisitions. Fellows has the first right to projects generated by Thomasson for up to a 100% basis on projects selected. Projects recently acquired by Fellows include the Bacaroo project in Colorado, the Gordon Creek project in Utah, and the Carter Creek project in Wyoming.
The agreement calls for TPA to present to Fellows an average of eight (8) projects per year with an area of interest of 10,000 to 80,000 acres per project with a reasonable potential of at least two hundred (200) billion cubic feet of natural gas reserves (200 BCF) or twenty (20) million barrels of oil reserves (20 MMBO).
Fellows believes the Bacaroo project represents a low risk opportunity to establish conventional oil and gas production through inexpensive drilling in areas of established production, while other projects being reviewed offer longer term, larger potential exploration opportunities in producing areas in the overthrust geology of the Rocky Mountains. As new projects are acquired, Fellows will add diversity to the over 240,000 acres of coal bed methane and conventional oil and gas projects it has previously optioned.
Management hopes these transactions will bring additional value to the shareholders of Fellows Energy. There is no guarantee that the agreement with TPA or the leases that Fellows has recently acquired will increase the value of its shares of common stock, or that Fellows will acquire rights to explore and operate any other such projects, or that in the event that it acquires rights to explore and operate other such projects, that these actions will be successful or increase the value of Fellows' common stock.
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