Mosman Oil and Gas Limited (LON:MSMN) said it has executed contracts to acquire an additional 80.83% working interest of the Cinnabar Lease in East Texas for a cash consideration of US$62,500, increasing Mosman’s working interest to 97%.
The Cinnabar Lease is a 348.83 acre lease ‘Held By Production’, which forms part of the Challenger Project in which Mosman has a 16.17% working interest. The Challenger Project is located in East Texas, between Mosman’s Stanley and the Champion Projects where drilling has just been completed at the Falcon-1 well.
The oil exploration, development, and production company acquired 32.33% of the additional working interest from NADSOILCO LLC, another 32.33% from Mr Clendon B. Claire and 16.17% from Baja Oil & Gas LLC.
The remaining 3% working interest is held by a third party and Baja is in the process of acquiring that 3% working interest. Completion of that third party transaction is anticipated to take a few weeks.
There are four development drilling locations on the Cinnabar lease identified using nearby wells and 3D seismic methods. These are the same methods used to identify the targets at Stanley and Falcon.
There are two wells drilled in the Lease which have produced significant quantities of oil but are now shut-in. The current Operator, NADSOILCO, maintains the lease as ‘Held By Production’ by periodically opening one of these wells to produce a few barrels of oil. As a result, in recent years there has been no material production, profit or revenue from this lease. Mosman will review operations and the possible workover of one or both of the wells to increase production.
Mosman will become the operator of the Cinnabar lease. Contract operator services will be provided by Contour Exploration and Production LLC, a company owned by Howard McLaughlin. Mosman already has an established and good working relationship with McLaughlin and Contour, which provides contract operator services at Falcon-1 and manages the Welch Oil Field.
In exchange for providing these services on the Cinnabar, Contour may earn a 12% working interest in the lease when a well is drilled, carried by Mosman to a cap of US$96,000.
Thhe group said the acquisition will enable Mosman to continue to build the company’s production base in Texas. In parallel, the immediate priorities are to bring the Falcon-1 well on production, to proceed with the workover at Duff and to plan and prepare for drilling the Galaxie well.
In a statement, John W Barr, Mosman chairman commented : “This acquisition to increase our working interest in the Cinnabar Lease to 97% paves the way for the next stage of growth for Mosman. With the highly encouraging drilling results at the Falcon-1 well on the Champion project, our move to higher equity in larger prospects accelerates our growth.”
In a note to clients, analysts at SPAngel commented: “Mosman continues to build out its enviable portfolio in Texas with another shrewd acquisition in our view. The Company continues to focus on its production led growth strategy and the additional interest in this mature lease suggests further development upside is possible given recent analogous success.
“With the highly encouraging drilling results at the Falcon-1 well on the Champion project, our move to higher equity in larger prospects accelerates Mosman’s strategy in our view.”
In late morning trading, Mosman shares were 1.8% lower at 0.14p.
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