The agreement will facilitate maximum return from development of Slawson’s 48k net acres in Weld County, Colorado’s Denver-Julesberg Basin Niobrara Formation.
The site is in very good geographic position in terms of both logistics and historical production, located right by several high-rate producers.
A continuous drilling program will be kicked off in July of this year by Slawson, with the initial round of three test wells slated for completion in October.
A map of 57 targets has been compiled for the prospect, which will be aggressed through a program of continuous drilling extended throughout 2011 based on the analysis of data collected from these three initial test wells.
A $7.5M purchase by VYOG has secured 50% working interest in the 48k-acre block, and the Company will participate on a heads-up basis for all wells, in addition to working interest-appropriate participation on additional Weld and Laramie County acreage acquired within the Area of Mutual Interest.
The purchase price, as well as initial drilling costs, will be paid via cash on hand and from current production by VYOG, which is carrying zero debt with $12.5M cash on hand, and is fully funded through 2010.
CEO of VYOG, J.R. Reger, spoke about this natural strategic partnership with industry veteran Slawson in the D-J Basin, praising Slawson for their reputation and proven history in the Rocky Mountains, as well as their first-class geosciences department.
Mr. Reger called the joint venture ideal, and a perfect way to grab more of a foothold in an emerging oil resource play that has a truly exceptional cost of entry.
Mr. Reger also took care to note how well this move flanks their already strong position in the Williston Basin, while enabling the Company to leverage their superior cost structure and leasing advantages to give them a solid hold in “yet another exciting oil play”.
A horizontal Niobrara discovery right near the VYOG acreage put out 1,750 barrels of oil per day, and 360,000 cubic feet of gas per day, in its first eight days, yielding some 50k barrels of oil in the first 90 days according to state records (EOG Resources’ Jake well).