Jericho Signs a Letter of Intent Building on Previous Chaparral Acquisition
VANCOUVER and TULSA, OK, Oct. 19, 2015 /CNW/ - Jericho Oil Corporation ("Jericho" or the "Company") (TSX-V:JCO; OTCQX:JROOF), a growth-oriented oil and gas company engaged in the acquisition, exploration, development and production of overlooked and undervalued oil properties in the Mid-Continent, announces that it has signed a Letter of Intent ("LOI") to acquire a 50% working interest in six horizontally producing wells and drillable leaseholds in Central Oklahoma for a total cash consideration of USD$1.55 million.
The acquisition totals just over 10,000 acres with current gross production of approximately 119 barrels of oil equivalent per day (87% Oil, 13% Gas at an economic equivalent 20mcf:1 BOE) including four saltwater disposal wells. The asset package is in an area complementary to Jericho Oil's existing operations in Oklahoma and represents the Company's third acquisition within Central and Northeast Oklahoma in 2015.
Jericho's primary business strategy during the low-price oil environment is to roll-up undervalued high-quality producing oil assets within the Mid-Con that are or can be operated below $20 per barrel.
The planned acquisition is located east of the Nemaha Ridge, a structural uplift which gives way to higher oil and liquids content on the eastern flank within the Mississippi Lime formation. The Mississippi Lime region, more broadly, has seen the steepest year-over-year decline in rig count to-date, which serves as a function of capital flight and has resulted in advantageous market dislocations relative to other basins across North America.
Accordingly, many small to large cap producers have vacated the region, allowing Jericho the opportunity to capitalize on the large sunk costs, exploration efforts and experiences of previous development. In an environment of generally low prices, favorable operating economics and unfavorable drilling economics are mutually exclusive. While the Mississippi Lime region has struggled to maintain its place as the "next horizontally drilled shale play," the operating economics on producing horizontal wells remain extremely compelling.
The planned acquisition was previously drilled horizontally. However, Jericho maintains its strategic focus on targeting the Mississippi Lime vertically, allowing for stronger risk-adjusted returns. In addition to the Mississippi Lime formation, the acquired geology and drilling data suggests the existence of potentially viable stacked zones up-hole throughout the acreage.
Allen Wilson, CEO of Jericho, said, "This LOI shows that our 'patiently-aggressive' acquisition strategy is starting to pay dividends. After nearly ten months in which WTI has averaged around $50 / bbl, we are beginning to see seller capitulation and accordingly, narrower bid-ask spreads. The acquisition will add high quality production, positive cash flow and future drilling potential to Jericho's portfolio. We will continue to seek opportunities with positive operating cash flow and stacked pay acreage for future drilling in a higher price environment."
The acquisition is slated to close on or before December 15, 2015.
Further, Jericho has granted an aggregate of 100,000 incentive stock options to an officer and an employee of the Company. All of the stock options are exercisable at a price of $0.40 per share for a period of 5 years. The stock options have been granted under and are governed by the terms of the Company's incentive stock option plan.
About Jericho Oil Corporation
Jericho is focused on growth through consistent, predictable and repeatable high margin conventional oil production by bringing new and proven technology to legacy, onshore basins in the U.S. Jericho has acquired a 50% interest in 8,100 acres and 200 gross BOED in the Mid-Continent and is actively seeking additional properties in the region. Jericho recently signed an LOI for just over 10,000 acres and 119 BOED in Central Oklahoma. For more information, please visit www.jerichooil.com.
Cautionary Note Regarding Forward-Looking Statements
This news release includes certain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual events and results to differ materially from Jericho's expectations include risks related to the exploration stage of Jericho's project; market fluctuations in prices for securities of exploration stage companies; and uncertainties about the availability of additional financing.
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.
SOURCE Jericho Oil Corporation