China North East Petroleum Holdings Ltd. announced that the company has closed on its purchase of the Sunite Right Banner Shengyuan Oil and Gas Technology Development Co., Ltd., an exploration and production company with operations in Inner Mongolia.
China North East Petroleum Holdings Ltd. said that the final acquisition price was $43.4 million, payable in a combination of cash and stock. The cash component of the deal is $10.6 million and is payable no later than May 16, 2011.
China North East Petroleum Holdings Ltd. will issue 5.8 million shares of common stock valued at $32.8 million to Shengyuan shareholders. The stock will be restricted and cannot be sold by the holders for six months.
Shengyuan holds the exclusive exploration and drilling rights in the Durimu oilfield located in Inner Mongolia. The rights expire in 24 years and the company has the right of first refusal to renew the lease.
A reserve study conducted on the Durimu oilfield estimated that the field held total proven reserves of 1.54 million barrels of oil, with an estimated PV-10 value of $46.4 million. China North East Petroleum Holdings Ltd. believes that this study understates the potential of the field and expects to recover additional resources above this amount.
For more information on the company, go to www.cnepetroleum.com