Synergy Resources Corp. (NYSE MKT: SYRG), a U.S. oil and gas exploration and production company focused in the Denver-Julesburg Basin has entered into a joint development agreement (Agreement) with Johnson Production Corp. (JPC) and Kodiak Petroleum Inc. (Kodiak), both Colorado corporations, to drill oil wells and develop acreage in Dundy County, Neb.
The agreement covers a defined area of 8,011 net mineral acres in Dundy County and provides for the drilling of up to 10 wells. It has an initial term of one year, and annual extension provisions for an additional four years. JPC or Kodiak will be the operator for all wells.
For each well that JPC and Kodiak drill, they will pay 5/8ths of the costs to drill and complete, and will thereby earn a 50% working interest in the well and the spacing unit. In addition, for each well that they drill, they will earn a 5% interest in Synergy's interest in the remainder of the contract area. If all 10 wells are drilled, JPC and Kodiak will earn a 50% interest in Synergy's interest in the contract area. Synergy will pay 3/8ths of the cost of each well and will retain both a 50% working interest and an overriding royalty interest.
Ed Holloway, co-CEO, of Synergy commented, "We are anxious to begin the development of our Nebraska assets with this agreement with JPC. We have been closely monitoring the increasing success by other operators in this area and believe this is an opportune time to begin deploying drilling capital to these assets. This is a conventional, shallow oil play with low drilling and completion costs for vertical wells. It is the first step in the long term plan for the development of these assets. We have an additional 36,000 net acres surrounding the contract area with JPC in Dundy County, and approximately another 130,000 acres in nearby counties in Nebraska. We are pleased to partner with JPC who is led by Kent Johnson a geologist by training and a forty year veteran in the oil and gas exploration industry. Mr. Johnson is the former Exploration Manager of Anador Resources/American Penn. He and his partners have been evaluating this area for the past 5 years. We plan on submitting for permits and begin drilling the first well in the next few months."
Synergy is based in Platteville, Colo.
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