LONDON (Alliance News) – Mayan Energy Ltd has entered into a USD2.0 million farm-out deal with Longview Oil & Gas LLC for its licences in the US state of Oklahoma.
The agreement is a farm-out of a 50% working interest in Mayan’s 100% owned and operated Zink Ranch and Mathis leases in Osage County, Oklahoma.
As part of the deal Mayan will receive USD50,000 in cash and a 50% carried interest, worth about GBP2.0 million, one new drill well on each of the leases and five workovers of wells at the Zink Ranch lease.
The Mathis new well will be drilled to target the Mississippian formation with an estimated cost of USD1.3 million.
Mayan said due to reduced costs in the oil services industry, as well as stable oil and natural gas prices, a vertical well to target the Mississippian reserves is attractive at current prices.
Meanwhile, the Zink Ranch well will be drilled to target and fracture multiple Pennsylvanian sands with an estimated cost of USD350,000.
The five Zink Ranch workovers are expected to generate production by fracturing existing tight formations within existing wells, with an total cost of about USD300,000.
Mayan said it has agreed that an affiliate of the farm-in partner will act as operator for the farm-in work.
Mayan and Longview are currently in talks for timings of the farm-out, but Mayan said an indicative work plan has suggested that the programme will start within 90 days.
“This is an excellent transaction that unlocks value latent within Mayan’s portfolio. We have been able to do this as a result of a number of factors, including the resolution of the regulatory and legal challenges that were facing the oil and gas operators in Osage County, Oklahoma that have now largely been resolved; our restructuring of our Oklahoma operations and now, finding an investor who was attracted by the prospects offered by our Oklahoma assets,” Mayan Chief Executive Eddie Gonzalez said.
Gonzalez said that the deal creates several potential sources of near to medium term upside for production, revenues and the share price, and if the programme works out, Mayan intends to accelerate the development of the Oklahoma assets.
Shares in Mayan were down 9% to 0.29 pence on Monday.
By Maryam Cockar; email@example.com; @MaryamCockar
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