CALGARY, Sept. 27, 2016 /CNW/ - Montana Exploration Corp. ("Montana Exploration" or the "Company") (TSXV: MTZ) today announced that it has entered into an agreement (the "Farmout Agreement") under which the Company will drill and operate five Shaunavon oil well prospects that were delineated using the Company's extensive 3D Seismic on its directly held and option lands comprising approximately 447,000 acres (or 689 square miles) in Blaine & Hill Counties, Montana.
Drilling Program & Farmout
The Farmout Agreement was entered into with Rioco Partners, Ltd. ("Rioco"), a company managed by Montana Exploration's largest shareholder, who is also a director and "control person" of Montana Exploration. Five prospect wells identified by 3D Seismic will be drilled under the Farmout Agreement, targeting undiscovered recoverable resources of over 21 million barrels of oil, with the first well intended to be spudded on or about October 4, 2016 (the "Drilling Program"). All five wells will be drilled vertically to approximately 4,000 feet and are expected to cost approximately CAD$750,000 per well for a total program cost of CAD$3.75 million.
Under the terms of the Farmout Agreement, Rioco will pay 100% of the costs associated with the drilling of each well, plus a prospect identification fee for each well. In exchange, Rioco will earn a 75% working interest in each of the drilled wells. After the five-well project has paid out the costs to drill, complete, equip or abandon all five wells, Rioco's working interest in each well will reduce to 50%. Rioco will also earn a 50% working interest in the acreage associated with each of the prospects drilled (a "Prospect Area"), which can be converted at Rioco's election to a 5% gross overriding royalty prior to the drilling of any development well in the Prospect Area. Four of the initial prospects to be drilled pursuant to the Farmout Agreement are on lands held by Montana Exploration and one is part of the option acreage to be earned by the Company through a farm-in it has with a large Montana based utility that was announced on December 1, 2015.
These shallow, low cost oil prospects are economic at below the current commodity prices of approximately $45 per barrel and economics are competitive with drilling being undertaken in the United States in the Permian basin. In addition to completing the Drilling Program pursuant to the Farmout Agreement, Montana Exploration remains focused on financing the Company's outstanding payables and general, administrative, technical and land costs associated with the Drilling Program implementation.
The Drilling Program is based on the results of the first phase of a geophysical study of 286 square miles out of 315 square miles of 3D seismic data (the "3D Seismic"). The 3D Seismic covers approximately half of the 447,000 acres of land to which the Company holds the development rights.
The 3D Seismic has greatly assisted in resolving regional geology. 3D seismic has only recently been available in the region where most of the activity has occurred in drilling for gas in the shallow Eagle and Judith River sands from 800 to 1200 feet. Although there have been relatively few local Shaunavon penetrations, more than 20 million barrels of oil have been produced from offsetting acreage in the Montana portion of the Shaunavon trend (Source: Montana Board of Oil & Gas Conservation). The Company's acreage is an extension of the Shaunavon trend north of the border in Canada, which has produced more than 400 million barrels of oil to date (Source: Saskatchewan Ministry of Energy and Resources).
The Company has identified over 30 prospect areas on its acreage so far, in both the Shaunavon oil and Eagle gas zones, from which five priority targets were selected for the Drilling Program. On a "pre-drill basis", the five prospects represent drill targets for undiscovered recoverable resources of 21 million barrels of oil which has been extrapolated from the 3D Seismic, comparison to recovery factors from adjacent pools, and the Company's estimate of reservoir porosity, thickness and quality from adjacent wells.
Montana Exploration is also using the 3D seismic to evaluate natural gas prospects in the Eagle and other potentially productive horizons to support a future gas drilling program as natural gas prices recover.
ABOUT MONTANA EXPLORATION CORP.
Montana Exploration Corp. is an oil and gas exploration and production company focusing on the Shaunavon oil and Eagle gas opportunities underlying its extensive land holdings and drilling rights in the State of Montana. In the United States, the company operates through its wholly-owned subsidiary, Montana Land & Exploration, Inc. The Company's common shares are listed on the TSX Venture Exchange under the trading symbol "MTZ". Additional information regarding the company is available at www.SEDAR.com or at www.MontanaExplorationCorp.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
There is no certainty that any portion of the resources referenced in this press release will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
This press release contains statements that constitute "forward-looking information" or "forward-looking" statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", believe", "expect", "plan", "intend", "forecast", "target", "project", "guidance", "may", "will", "should" "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook.
This press release contains forward-looking information including, but not being limited to, the intended date to spud the first well under the Farmout Agreement, the number of wells to be drilled, the depth and cost of the wells, the total drilling program cost and the economics of the Company's oil prospects. Statements referring to reserves or resources are by their very nature forward-looking information. Statements in this press release relating to reserves and resources involve the implied assessment, based on certain estimates and assumptions that the described reserves and resources, as the case may be, exist in the quantities predicted or estimated, and can be profitably produced in the future. There is no certainty that it will be commercially viable to produce any portion of such prospective resources. Other assumptions and qualifications relating to drilling schedules, costs and other matters are inherent in these estimates.
This press release contains forward-looking information as it relates to the Farmout Agreement, including, but not being limited to, the expected cost of the drilling program, the prospect identification fee payable to the Company and the economic viability of the Company's oil prospects. This forward-looking information is based on reasonable assumptions and estimates of management of the Company at the time it was made, yet involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, risks relating to property interests, the ability of the Company to obtain required approvals, complete definitive documentation and complete transactions on the terms announced, the ability of the Company to complete further exploration activities (including drilling), the results of exploration activities, risks relating to oil and gas activities generally, the global economic climate, commodity prices, environmental risks, and community and non-governmental actions.
Forward-looking statements and information contained in this press release are based on our current beliefs as well as assumptions made by, and information currently available to, us. Although we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect.
By their very nature, the forward-looking statements included in this press release involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements.
Furthermore, the forward- looking statements contained in this press release are made as of the date of this document and we do not undertake any obligation to update publicly or to revise any of the included forward- looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
SOURCE Montana Exploration Corp.
For further information: about Montana Exploration, please contact: Charles Selby, Chairman and Chief Executive Officer or Donald Foulkes, President, by telephone at +1.403.265.9091 or by mail at 2300, 144 4th Ave. S.W., Calgary, Alberta T2P 3N4.