Sugarloaf Prospect >> Farmout
Eureka announced in the 3rd quarter of 2009 that it had been successful in its efforts to farm out its acreage across the Sugarkane Gas and Condensate field to Hilcorp Energy Company (“Hilcorp”), one the largest private E&P companies in the US.
The farmin by an established company such as Hilcorp to the Sugarkane field is a significant endorsement of the multi TCFe potential of this gas and condensate asset and the value of Eureka’s interest in the Sugarloaf land holdings within it.
Eureka will be free carried for the drilling, completion and tie in of up to 3 new horizontal wells and the stimulation of the three existing Sugarloaf horizontal wells; Kennedy #1H, Kowalik #1H and Weston #1H. The Sugarloaf farmin program aims to establish a total of 6 wells on production. Under the terms of our farmout this work program has a series of deadlines over the next 20 months.
The Farminee will earn an interest in Eureka’s acreage incrementally as each farmin activity is completed up to a maximum of 50% of Eureka’s interest in the Sugarloaf Area of Mutual Interest (“AMI”).
Eureka believes that this additional activity within the Sugarkane Field, together with the widespread ongoing regional activity occurring within the Eagle Ford Shale play will continue the process of demonstrating and establishing the considerable value of our interest in the Sugarloaf AMI within the Sugarkane Field. In addition, Eureka’s financial commitments through this development phase are minimal.
Hilcorp has committed to a farmin over the Sugarloaf AMI and other land areas either adjacent to or nearby, with corresponding drilling requirements. This will lead to a meaningful drilling and completion program that aims to establish a portfolio of producing wells within the Sugarkane acreage that in turn will assist in demonstrating the multi Tcfe potential of the Sugarloaf AMI.
Contingent Resource – Independent Report
On 1 October 2009 Aurora Oil & Gas (“Aurora”), being an ASX listed company with an interest in the Sugarloaf AMI and the larger Sugarkane Field, published some results of an independent review of their acreage and potential recoverable hydrocarbon volumes which was undertaken by Netherland, Sewell & Associates, Inc (“NSAI”). NSAI are a leading independent certification authority, who has acted on behalf of some of the largest shale development companies in the USA including Petrohawk Energy Corporation.
This announcement allocated a 2C contingent resource for Aurora’s working interest across the two horizons (Austin Chalk and Eagle Ford Shale) that constitute the Sugarkane reservoir. Extrapolating from the contingent resource announced on the basis of Eureka’s net acreage position indicates a 2C contingent resource for Eureka’s 12.5% working interest of approximately 58Bcf of gas and 10mmbbls of condensate pre farmout. This equates to approximately 20 mmboe (6 mcf of gas = 1 barrel of oil equivalent “boe”).