2010-02-01-2009-12-14-2009-12-24
Purchased 303,000 gross acres in PA, NY Appalachian Basin, gaining 5 MMcfe/d, 56 Bcfe proved.
Australia-based resource and energy investor Imperial Corp. Ltd. (ASX: IMP) via subsidiary Empire Energy LLC has acquired approximately 303,000 gross acres of land in the Appalachian Basin from Range Resources Corp.
The assets include 1,805 natural gas wells producing approximately 5,000 Mcfepd or 1.8 Bcfepa at current production levels.
The wells acquired are stable, long life gas producers in New York and Pennsylvania States. In addition, there are at least 250 proved undeveloped locations and over 260 other prospective locations.
Empire Energy will also acquire a fully equipped field office and staff at Mayville, NY. The oil and gas acreage is criss-crossed by extensive gathering networks and over 675 miles of pipeline, ensuring future development drilling can be undertaken with little restriction due to lack of transportation. Gas in the region sells at a positive basis to NYMEX due to the close proximity of major customers and markets.
Independent Reserves Forecasts estimate 1P Reserves of approximately 56 Bcfe and 3P Reserves of 62 Bcfe. Utilising early December 2009 oil and gas swap prices, the 1P PV10 valuation is approximately US$73.6 million, or 3P PV10 valuation is approximately US$78 million. Total acquisition cost was US$36.3 million, plus a further US$1.7 million placed into escrow to acquire third party revenue interests in a number of the wells.
Imperial's Executive Chairman, Mr Bruce McLeod, said, "This is a very exciting time for the company as after 2 years of reviewing and negotiating to acquire oil and gas assets in the Appalachian Basin, we have achieved our first significant acquisition at price metrics that offer attractive upside potential. With this acquisition, Empire Energy has reached a critical mass which demonstrates our ability to close on medium sized acquisitions and will allow traction for several further acquisitions which are currently in the pipeline.
In summary, Empire Energy is acquiring proved producing reserves at an implied US$0.99 / Mcf (Mcf = 1,000 cu ft), or proved reserves at an implied US$0.57 / Mcf. (This is equivalent to around A$0.57 / Gj). Implied value per daily Mcfe produced is US$7,260.
The assets were owned by a large US independent E&P company and little focus has been placed on these assets over the past several years. Empire Energy management believe there are a number of opportunities to increase production at little cost.
Based on independent reserve forecasts, net revenues generated from the acquisition assets in 2010 will be around US$10 million, producing a field EBITDA of aroundUS$6.5 million. In addition Empire will generate income from its existing operations.
A majority of the producing wells are operating in the Medina sandstones, in both New York and Pennsylvania. Lifting costs are around $1.80 / Mcf. These wells have long lives, around a 5% depletion per annum, produce pipeline gas and little water. Other wells acquired are in the Queenston sands and Trenton-Black River limestones.
Subject to economics at the time, Empire will seek to implement a drilling program to increase income and PDP reserves.
One of the most exciting aspect of this acquisition is the very large land holding, which has multi-levels of potential gas plays, ranging from Marcellus (in some areas) and Utica shales through to 3 or 4 more widely known conventional producing tight sands. None of these potential resources are included in the reserves.
In effect, Empire Energy has acquired a free option for an extensive exposure to other gas (and potentially some oil) opportunities, over 300,000 acres in one of the USA's oldest and well known oil and gas producing regions."