Highlands Natural Resources has executed an expanded agreement with Renegade Oil & Gas Company that substantially increases its land position in its East Denver, Colorado, Niobrara shale play.
The agreement also provides operational flexibility to the Highlands that will enable it to save up to $500,000 for each well it drills.
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Furthermore, Highlands receives direct control of the lease that will simplify and accelerate procedural, administrative and regulatory aspects of drilling additional wells beyond the first six wells specified in the original Renegade agreement.
Highlands Natural Resources chairman and CEO Robert Price said: “As a result of this new agreement, we are delighted to welcome Renegade as a new shareholder and look forward to working with them to unlock the significant potential value in this acreage.
“Beyond this agreement, we see great potential for additional collaboration with Renegade, who holds a significant land position in the East Denver Project area, and is a highly capable operator in the Denver Julesburg Basin.
“In parallel we continue to advance negotiations with potential financial partners regarding third party funding of the drilling programme in East Denver.”
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By GlobalDataThe company has developed operational plans together with a core team of contractors and consultants to spud its first wells in the summer of this year.
Price said: “I remain highly enthusiastic about the East Denver project, as it continues to offer Highlands a near-term opportunity for cash flow from a resource that has been substantially de-risked through extensive nearby drilling and production.”
Highlands is required to pay Renegade $1.1m in cash and issue 3.5 million ordinary shares as consideration for the acquired lease.
In line with earlier agreements with Renegade, in all wells drilled by Highlands on the acquired acreage, the company will retain a 100% working interest, as well as full responsibility for drilling and operating costs. Highlands will receive 80% of revenue generated by the wellbores on Renegade’s acreage.
Highlands has planned to start drilling the first six wells this summer, while the mandatory date to commence first drilling is 1 September.
Renegade president Edward Ingve said: “I am glad to announce today’s agreement with Highlands, and to further expand the relationship between Highlands and Renegade.
“I view today’s transaction as an excellent opportunity for maximising the value available to both companies in the East Denver project through Highlands’ drilling and development of the area.”
Following the agreement, Highlands will have full control of the 640 acres of Niobrara oil and gas lease in Arapahoe County, Colorado.
With the new agreement with Renegade, Highlands will have the ability to drill wells based on internal assessments of optimal spacing, well design and placement.
Highlands also now holds greater control and flexibility in the timing and sequencing of drilling operations, which facilitates ‘pad drilling’.
