US-based oil and gas company Torchlight Energy has signed an agreement with Redhawk Resources to acquire a working interest in its 15,000 gross acres located in Finney County, Kansas in US.
The deal is part of an option agreement signed between Redhawk and Terrace Energy’s wholly-owned subsidiary, Terrace US Holdings.
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The transaction will give Torchlight a 9% working interest in the acreage and a small overriding royalty interest (ORRI), and allow it to target the Mississippian Lime trend.
Torchlight will be carried through the tanks on at least three horizontal Mississippian obligation wells, with the possibility of several more carried wells, depending on the results of a test programme.
A famous conventional tight limestone formation, the Mississippi Lime trend currently produces about 15,000 vertical wells, spread over 17 million acres.
The area has been significantly developed by oil and gas companies operating in the area using horizontal drilling technology, while two Mississippian Lime wells have been discovered on adjacent acreage in Western Finney County.
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By GlobalDataTorchlight president John Brda said the working interest should provide the company with cash flow in early Q3 of 2013.
"In addition, because our interest is carried for at least three wells and possibly as many as six or seven wells, by the time we are responsible for our own working interest contribution, we will be doing so out of cash flow."
"By size of acreage and opportunity for Torchlight, this is the single largest deal in our short history and when fully developed, provides Torchlight with significant upside and cash flow," added Brda.
The deal is expected to complete in late Q1 or early Q2 2013, while primary development of the field will start in late Q2 or early Q3 2013.
