|Project Name:||Petra Project|
|Ownership:||50% Working Interest|
|Acreage Position:||Over 10,000 acres (net to Elixir)|
Elixir completed its acquisition of a 50% Working Interest (∼43.75% net revenue interest) in 14,455 net acres in Washington County on 4 September 2014. Elixir’s paid an initial US$700,000 for the lease position and will pay the first US$1.5M of exploration costs on behalf of the joint venture, which will include initial seismic acquisition and interpretation together with two exploration wells scheduled for 2015. The agreed budget for the initial two year work program is US$3 million which, post expenditure of the first US$1.5 million by Elixir, will be funded equally by Elixir and its partner ("Apollo").
Following completion of the committed expenditure, Elixir will retain a 50% interest in the leases which have an initial term of five years with the option to extend for a further five years. There are no drilling or seismic commitments on the leases.
Elixir has also entered into an AMI with Apollo over some 26 Townships incorporating the acquired land which equates to a total land area of over 500,000 acres. During the tenure of the AMI, Elixir will have the opportunity to participate in all leasing and upstream oil and gas transactions conducted by Apollo within the AMI, ensuring strong alignment with a successful and experienced local Operator.
Subsequent to the initial transaction and pursuant to the AMI, Elixir and Apollo have acquired further acreage bringing the total acreage position of the joint venture to over 20,000 acres. Further leasing is envisaged in the near term with an initial target of between 25,000 and 30,000 acres being actively pursued.
The new opportunity lies within a proven onshore oil play in a low cost and low risk operating environment providing a company of Elixir’s size with material exposure and leverage to exploration success.
The leases acquired follow a new trend in the Denver Julesberg Basin ("DJ Basin") which is targeting Mississippian and Pennsylvanian conventional structures (at a depth of ∼2,500 metres) that have been successfully identified and drilled on 2D and 3D seismic in recent years. These discoveries have yielded some of the largest conventional oil discoveries onshore in the US in recent years and created substantial wealth.
The previous focus of exploration in the area has been shallower Cretaceous aged "D" and "J" Sandstone units that have been prolific producers in the DJ Basin and remain a legitimate target for Elixir, but the focus will be on the deeper conventional play which has not been greatly explored in the past.
New exploration thinking has opened up this play and costs are low with dry hole drilling costs at around US$1M per well. Elixir’s acquisition has secured a material foothold in this emerging play on attractive terms which provides shareholders with significant leverage to exploration success.