Magnum Energy Inc. and Nextraction Energy Corp. Sign Joint Venture Agreement to Acquire Viking Oil Property
February 03 2011 - 9:30AM
Marketwired
Magnum Energy Inc. (TSX VENTURE: MEN) ("Magnum") is pleased to
announce a joint venture agreement ("JVA") with Nextraction Energy
Corp. (TSX VENTURE: NE) ("Nextraction") for the acquisition of a
Viking Oil property located in the Provost Area of eastern Alberta,
Canada.
The acquisition will include four wells currently producing a
total of 30 barrels of oil per day from the Viking A pool, three
and one-fourth (3.25) sections of land with the potential to
develop an additional 10 to 12 horizontal wells in the defined
pool, a water disposal well, pipelines and production facilities
necessary for further development. The acquisition is expected to
close on or before March 15, 2011. The Provost area is known for
its prolific Viking A formation where vertical wells have produced
up to 300,000 barrels of oil per well.
Terms of the JVA provide for the Companies to acquire the 100%
owned property from a third private party for $2.8 million on a
fifty-fifty basis. Nextraction shall fund 100% of the acquisition
and receive 100% of the production revenue until payout of the
Purchase Price, or until Magnum has paid to Nextraction 50% of the
Purchase Price. Upon payout of the acquisition, production revenue
will be shared on a 50/50 basis.
Nextraction shall also pay 100% of the costs to drill and
complete to tie-in two horizontal wells to earn its 50% interest.
The wells are projected at 800 meters in depth and at least 900
meters horizontally, with the first well commencing before June 30,
2011. Preliminary estimated costs are $1.5 million per well. The
Companies shall share revenue from the two wells on a 50/50 basis
from the date of first production. Costs and revenue for subsequent
development will then be shared on a 50/50 basis.
Richard Nemeth, President and CEO of Magnum, states, "Magnum is
very pleased to joint venture with a strong financial and technical
partner like Nextraction. Both companies share similar corporate
strategies to create a balanced portfolio of oil and natural gas
production. Horizontal wells in the Provost Viking A pool, which is
an extension of the Viking fairway that trends northwest up to the
Redwater Viking play, have proved to have superior economic returns
than the deeper horizontal oil plays found in W5. We look forward
to developing this Viking project with Nextraction."
Magnum and Nextraction are targeting the projected 12 million
barrels of oil in place on the joint venture acreage. This estimate
is based on both Nextraction's and Magnum's technical evaluation of
the pool and coincides with a 1968 reservoir study by McDaniel
Consultants submitted to the Energy Resources Conservation Board
wherein they reported a field total potential of 80 million barrels
of oil for the Provost Viking A pool. The joint venture acreage
represents one-seventh of the total pool acreage. Recovery from the
pool to date has been less than 4% of the Original Oil in Place
which allows for significant upside recovery from horizontal infill
drilling and waterflood optimization.
Operators in the general area developing the Viking formation
include Penn West Energy, Westfire Energy Ltd., and privately held
Mancal Energy Inc. and Cutpick Energy Inc. Horizontal drilling and
technological advances in completion techniques have brought a
resurgence of interest in the Viking A oil pool.
About Magnum Energy Inc.
Magnum is a junior oil and gas producer with operations located
in the Western Canadian Sedimentary Basin. The Company produces
from operations in Alberta, and maintains 100% ownership of the
Sedalia gas facility in East-Central Alberta.
About Nextraction Energy Corp.
Nextraction is a Canadian junior oil and gas producing company
engaged in the exploration and development of oil and gas resources
in North America. Nextraction targets projects with known reserves
and plays that provide lower risk, high return development
opportunities in both conventional and unconventional resource
projects, where their technical expertise can be applied to enhance
production.
On behalf of the Company
Richard A. Nemeth, President and CEO
FORWARD LOOKING STATEMENTS DISCLAIMER
Certain statements in this document may contain "forward-looking
statements" or "forward-looking information" within the meaning of
applicable securities legislation. Such forward-looking statements
or information include, without limitation, forecasts, estimates,
expectations and objectives for future operations that are subject
to a number of assumptions, risks and uncertainties, many of which
are beyond the control of the Company. The Company does not assume
the obligation to update any forward-looking statement, except as
required by applicable law.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Magnum Energy Inc. Richard Nemeth President & CEO
604.218.1479 rnemeth@magnumenergyinc.com
www.magnumenergyinc.com