By Oil & Gas Financial Journal staff
On Nov. 30, Dallas-based Sun River Energy began drilling activities in compliance with the terms of its farmout agreement with Devon Energy Production Company LP, which Sun River initially announced on Oct. 27. The well, in Panola County in East Texas, is permitted to 12,000 feet in the Carthage Field to test the Haynesville Shale. The company expects to encounter commercially productive zones in the Travis Peak and Cotton Valley geological formations.
On Oct. 21, Sun River, a development-stage oil and gas exploration and production company, announced plans to acquire a majority of the oil and gas properties of privately-held Katy Resources ETX LCC, which estimates its total proved reserves at 17 bcfe, for $5 million in cash and $3.5 million shares of the company’s stock. In addition to proved reserves, “3P” reserves are estimated at 89 bcfe and total potential resources are estimated at 270 bcfe. The company estimates there are an aggregate of 253 additional drilling locations in the leasehold assets to be acquired.
The deal is expected to close on or before Dec. 31.
Donal R. Schmidt Jr., Sun River’s president and CEO, said, “This acquisition allows [us] to begin generating revenue. It also allows us to add proved producing oil and gas assets at a very attractive discounted price. We estimate the cost of acquiring proved reserves in this transaction at less than $0.70 per Mcf of natural gas, which we believe is significantly less than the finding and development costs that would be incurred to replace the reserves.”
Sun River also holds assets in Angelina, Cherokee, Houston, and Panola counties in East Texas. The geological pay packages overlaying the leases cover the Woodbine, the Pettit, the James Lime, the Travis Peak, the Cotton Valley, and the Haynesville/Bossier formations. The company expects to see EUR from 1.5 bcfe to 2.5 bcfe on average, per vertical well. In addition, Sun River will look for opportunities for selective horizontal drilling on an in-fill basis.