Emerald (EMR) is pleased to advise it has executed a Memorandum of Understanding securing an option to acquire 31.5% foundation equity interest in a newly formed company, NOXXE LLC, which holds interests in producing oil and gas leases in Harris and Galveston counties, Texas USA.
NOXXE LLC is a company formed specifically to acquire and develop oil and gas assets purchased from the bankruptcy of Daystar Oil & Gas Corp. Emerald’s total equity contribution will be $US1,000,000, consisting of $US750,000 in cash and the remaining $US250,000 in Emerald ordinary fully paid shares, based on the volume weighted average price of EMR shares in the week immediately prior to and after the date of this announcement.
Emerald’s has paid refundable cash deposits totalling $US400,000 over Q4 2009 and Q1 2010. The remaining $US350,000 required for Emerald’s final equity contribution will be funded from Emerald’s cash reserves. Final completion, subject to the execution of the NOXXE Company Agreement, is expected by end March 2010. Under the Company arrangements, Emerald will not assume operating responsibilities, but expects to provide sub-surface technical advice and to hold an appropriate level of influence regarding company decisions.
The Daystar assets consist of interests in the Humble Field (Harris Co.), Dickinson Field (Galveston Co.) and North Dyersdale Field (Harris Co.), all located within a 50 kilometre radius of Houston, Texas.
The interests in those three fields were projected to contain remaining proved reserves (NOXXE net interest) of 1,075,000 barrels of oil and of 335 MMscf of gas, with the majority of the oil and gas reserves located in the Humble and North Dyersdale fields, respectively. NOXXE’s net interests in these three fields, based on proved reserves only, has been independently valued at a Net Present Value (10% discount rate) of approximately $US 30 million (based on $US 60/bbl oil price and $US6.00/Mcf gas price).
In addition to the proved oil and gas reserves, the Daystar portfolio contains a number of untested and undrilled prospects which provide further upside to NOXXE. These include additional (net to NOXXE) possible reserves of 1.2 Bcf gas and 14,000 barrels of condensate from a deep Wilcox gas location in the Humble field, potential structures in the North Dyersdale field based on planned interpretation of a new 3D seismic survey and various well deepening opportunities. Based on several deep Wilcox wells in the Humble field, the Wilcox gas well was estimated to result in a NPV10 of $US3.8million (NOXXE net interest, unrisked).
In addition to these interests, NOXXE is also pursuing a number of other assets and interests previously owned by Daystar through ongoing bankruptcy processes.
