Linc Energy Ltd (LNC) is pleased to announce that its wholly-owned subsidiary, Linc Gulf Coast Petroleum Inc., has acquired 14 producing oil fields (consisting of 156 leases covering approximately 13,400 acres) from ERG Resources LLC., for a price of US$236 million. The acquisition secures immediate oil production of approximately 3,300 barrels per day (BOPD), and a significant CO2 enhanced oil recovery (EOR) opportunity.
The 14 oil fields purchased from ERG Resources are located in Texas and Louisiana and are within the Gulf Coast Onshore and Inland Waters Regions and include all related ASX infrastructure such as pipelines, tank batteries and processing facilities. All of the fields are either salt domes or faulted four-way closures related to deep-seated salt movement.
Independent reports commissioned by Linc Energy indicate that the fields have the potential to increase recoverable oil by up to 24 million barrels by optimisation of current production and additional drilling operations.
Cumulative production for the 14 fields is estimated to be over 700 million barrels of oil to date with a regional recovery factor of approximately 40%, indicating a significant potential to achieve substantial increases in production from Enhanced Oil Recovery (CO2 flooding).
All of the acquired fields in the asset package are 100% operated by ERG Resources, with ERG Resources also holding 100% of the working interest in the majority of the fields. A significant factor regarding this acquisition is that ERG Resources has to date only advanced significant development into one area, the Barbers Hill salt dome, achieving some excellent results. There are 6 more salt domes in the asset package that Linc Energy can assess to drill and expand with similar techniques to those that ERG Resources has utilised on the Barbers Hill field.
The key terms of the Asset Purchase Agreement between Linc Energy and ERG Resources are as follows:
1. The purchase price of the assets is US$236 million (subject to completion adjustments and necessary consents from parties holding a “first right of refusal” over approximately 4,300 acres of the acquired oil fields).
2. The assets purchased consist primarily of oil & gas leases, property interests (including all related infrastructure such as pipelines, tank batteries and processing facilities) and 410 wells upon the Texas and Louisiana oil fields which are held directly by ERG Resources or by three wholly-owned subsidiaries of ERG Resources. Linc Energy will acquire the assets held by ERG Resources and will acquire 100% of the equity interests in the ERG Resources subsidiaries.
3. The total area of these leases is approximately 13,400 acres held across 156 oil & gas leases with 410 wells of which 177 wells are currently producing.
4. Completion of the transaction and operational handover is scheduled for 1 August 2011.