US-based Shoreline Energy has acquired royalty interests in the Wattenberg Colorado light oil project located in the Denver-Julesberg Basin (DJ Basin) for $12.5m, from a private company based in the US.
As part of the agreement, Shoreline will gain royalty interests of up to 1.45% on over 150 land tracts, comprising about 22,000 gross acres of land located in Weld County Colorado, in the Wattenberg project.
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In addition, the royalty interest includes revenue related to 300 existing producing low rate vertical oil wells.
It is estimated that until 1 November, over 20 horizontal wells were drilled on the royalty lands, while about 60 additional locations have been permitted to be drilled during the first six months of 2013.
A large-scale area, the Wattenberg project is part of a low risk horizontal development well program, which uses multi-stage frac technology and is led by Anadarko Petroleum and Noble Energy.
Plans are underway to invest an additional $2.5bn in 2012, to produce light oil from the Niobrara and Codell formations.
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By GlobalDataIt is estimated that an average of 500 and 1,200 barrels of oil equivalent per day per well will be produced, while the horizontal wells in the Wattenburg field has the capacity to produce over 300,000 to 600,000 barrels of oil equivalent per well.
Shoreline CEO Trevor Folk said that the Wattenberg project gives the best return of any project that the company has evaluated in Canada or in the US.
"Third, with the vast majority of these wells producing very light sweet crude oil, we come closer to our goal of a balanced commodity portfolio of 50% liquids and 50% natural gas."
"With projected cash flows averaging $375,000 per month in 2013 and exiting 2013 at levels exceeding $750,000 per month, the acquisition increases discretionary cash which can be redeployed to create shareholder value through drilling of additional oil well in Canada, acquire additional assets, or increase our cash dividend," added Folk.
Based on the existing development practices of the operators, it is estimated that there are about 400 to 700 potential drilling locations on the acquired acreage.
