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Sacgasco acquires 5 more gas wells

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Oilfield Technology,

Sacgasco Ltd has significantly strengthened its asset base in the Sacramento Basin, California, through the acquisition of five additional operated natural gas wells from various private Californian entities. The acquisition is effective 1 February 2017. Sacgasco will operate the wells under its current service agreement with Dero Parker’s Integrity Management Services.

The assets also include all associated leases, production facilities, including meter stations and pipelines in two gas fields Rancho-Capay, adjacent to existing SGC production and East Rice Creek Gas Field, immediately north of Rancho-Capay. The leases and gas production infrastructure acquired lie above or adjacent to SGC’s mapped 1+ Tcf* Dempsey Natural Gas Prospect, and are a highly strategic addition to the Company’s lease holdings in the prolific Sacramento Basin which has produced over 11 Tcf of natural gas to date.

As consideration, Sacgasco will assume future liabilities for plugging the wells, and removing associated facilities, estimated to be approximately US$50 000 per well. This will occur at some undetermined future time that is dependent on operational decisions on future usage of the wells for production, workovers or new drilling. Current gross (100%) production from just two wells in the latest acquisition is around 120 million ft3/d gas. There are opportunities to bring other wells back into production through workovers and/or alternative gas gathering pipeline connections for modest expenditures.

This production has added to Sacgasco’s current gas production from Rancho Capay and Los Medanos Gas Fields and the gas production from the previous acquisition announced on 7 February 2017, which has been completed. In total, Sacgasco now has a portfolio of 25 natural wells in the Sacramento Basin with 10 in production and a further 15 wells that have the potential to be brought back into production. All production assets have material infrastructure, which can be used to market gas from successful exploration of Sacgasco portfolio of mapped Tcf-scale prospects.

After this acquisition, Total Gross Production is of the order of 900 million ft3/d which will place SGC amongst the Top-5 natural gas production operators in the Sacramento Basin. SGC’s working interest in all it natural gas wells ranges from 50 to 100% and Net Revenue Interests (after Royalties) are in the range of 68% to 83% (of 100%). Xstate Resources Limited has an option under a Sacramento AMI agreement with Sacgasco to take between 10% and 30% of Sacgasco’s above Working Interest in the recent acquisitions.

Sacgasco’s Managing Director, Gary Jeffery, commented: “This transaction adds further diversity and strategic value to Sacgasco’s portfolio, providing access to additional operated leases, production, and natural gas infrastructure facilities adjacent to our exciting Dempsey Prospect.

Sacgasco already has access to 3D seismic data over the areas acquired and the Company is confident that in addition to the Dempsey Prospect, other highly prospective gas prospects will be readily identified.

Sacgasco’s portfolio of mapped prospects in the Northern Sacramento Basin now includes the Dempsey and Alvares appraisal Prospects, lookalike-prospects, and over 20 natural gas prospects on its operated acreage. This portfolio gives Sacgasco optionality for drilling as gas prices improve in response to the key role of natural gas in the supply of energy to California and world markets.

This latest acquisition further solidifies Sacgasco’s position in the Sacramento Basin, as the Company narrows its focus to the drilling of the Dempsey 1 well in the coming months. The drilling of the Dempsey 1 well has the potential to be a key near-term value catalyst for Sacgasco. So too does the further development of our producing fields. The Company looks forward to providing shareholders with further updates in the near term as development, production & exploration strategies are progressed.”

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