American Petro-Hunter, Inc. announce that the Company has entered into an agreement whereby the Company intends to purchase production from two existing gas wells from Texas-based Oxalis Energy Group. Under the terms of the Letter of Intent (L.O.I.), the Company is currently undertaking a period of due diligence on the project with a thorough review of project data and well production history of this West Texas project.
The Company intends to purchase a minimum of 1.0 MMCF per day from the two wells for a proposed purchase price of $1.5 million. In the event of a successfully concluded due diligence assessment which is estimated to be carried out over the next 60 days, both companies may close the transaction by year end. Additionally, as part of the ongoing development of the project, the Company would further have the rights to drill a minimum of ten (10) development locations. The Texas gas play is a low risk, development drilling project where analog wells are producing at an average of approximately 300-600 MCF per day.
In related news, American Petro-Hunter is in preparation to commence drilling operations at the Rooney Project in Kansas. The Rooney location is directly adjacent to the north edge of existing Morrow Sand oil and gas production. An analog well designated as 3-30-25W in the Morrow pool has cumulatively produced 344,448 barrels of oil and 933,622 MCF gas. There are multiple wells within 2 miles of our acreage that have produced in the 35,000 to 40,000 barrel range from discrete sand channels.
The Company participated in a 3D seismic shoot at Rooney this summer in an attempt to locate Morrow sand channel potential on the acreage. The Company was pleased to receive a successful report indicating multiple sand channels were identified from the recently completed 3D seismic interpretation across the entire acreage. The first test well is scheduled to spud on or around November 10th. If successful, a multi well program is planned to commence immediately thereafter. The operator of the project is S&W Oil & Gas, LLC of Wichita, Kansas.
In other news, drilling operations at the Archer-Tsakopoulos #2 well in California and the #1 Keck well in Kansas have ended. Both wells successfully encountered oil and gas in the target horizons but adequate reservoirs in order to complete them as commercial producers were not found. The Colby remains a viable prospect as light oil discovered in the Kansas City formation may be present in other locations. The main objectives had good shows of oil in the Cherokee and Johnson formations but did not exhibit suitable permeability to produce at commercial rates. Further work and analysis will be required in order to fully develop the Colby lease.