PetroFrontier has signed a letter of intent (LoI) to acquire certain resource assets of Canadian-based Kasten Energy in the Cold Lake area of northeastern Alberta, for C$17.49m ($13.3m).
In connection with the acquisition, PetroFrontier plans to use its efforts to complete a private placement during the next few months.
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Upon completion, the company will use the proceeds for general corporate purposes, including drilling and completion of additional wells.
Under the LoI, PetroFrontier will acquire assets including a land base of 15.5 sections in the Cold Lake area.
During the first quarter of this year, production from these lands reached about 340 barrels of oil per day (bopd).
Due to weak oil price environment, existing volumes from these lands have been reduced to about 250bopd.
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By GlobalDataSix of the 11 wells drilled by Kasten to date are yet to be completed.
There are more than 20 existing wells that can soon be completed to bring the current productive capacity on the lands to more than 1,000bopd with less investment, PetroFrontier said.
PetroFrontier views that there are more than 200 additional potential drilling locations on the existing land base, which hold multi-zone potential for oil in the Mannville sequence.
The latest acquisition will provide existing productive capacity to the company in addition to an inventory of economic drilling locations.
The acquisition is subject to certain conditions and regulatory approvals and is expected to close on or about 30 June this year.
