Shoreline Energy Corp. (TSX:SEQ) announced the closing of its previously annouced acquisition of non-operated royalty interests in the Wattenberg Project, a prolific light oil project in the Denver-Julesberg Basin in Colorado. The deal has closed for US$12.5 million.
As quoted in the press release:
he Acquisition will give Shoreline a variety of royalty interests ranging up to 1.45% on over 150 land tracts representing over 22,000 gross acres of land, predominantly located in Weld County Colorado, in the Wattenberg Project. The Wattenberg Project is currently an area of a large scale, low risk horizontal development well program, using multi-stage frac technology, led by Anadarko Petroleum Corp. and Noble Energy Inc. (the “Operators”), with participation of a number of other senior oil and gas producers. The Operators are forecasting to invest in excess of $2.5 billion in 2012, targeting light oil in the Niobrara and Codell Formations(1). The Operators also forecast an average of between 500 and 1200 barrels of oil equivalent (“BOE”) per day per well and that horizontal wells in the Wattenburg field could recover as much as 300,000 to 600,000 BOE per well. Netbacks from Shoreline’s royalty position is forecast to average between $75.00 and $80.00 per BOE for 2013 based on current forward strip commodity pricing. Shoreline estimates that based on the current development practices of the operators, that there are between 400 and 700 potential drilling locations on the acquired acreage.(2)
Trevor Folk, CEO of Shoreline, stated:
We acquired royalty interests in the Wattenberg Project for several reasons. First and foremost, this asset provides the highest return of any project we have evaluated whether in Canada or the U.S. Second, being in a non-operated royalty position allows Shoreline to harvest passive income from a world class oil project, a project which continues to see accelerated drilling and continual upward revisions in production and reserves per well, making these assets a perfect fit for Shoreline’s mandate as a dividend paying, oil and gas production company. Third, with the vast majority of these wells producing very light sweet crude oil, we come closer to our goal of a balanced commodity portfolio of 50% liquids and 50% natural gas. With projected cash flows averaging $375,000 per month in 2013 and exiting 2013 at levels exceeding $750,000 per month, the acquisition increases discretionary cash which can be redeployed to create shareholder value through drilling of additional oil well in Canada, acquire additional assets, or increase our cash dividend.