CALGARY, Sept. 27, 2016 /CNW/ - Montana Exploration Corp.
("Montana Exploration" or the "Company") (TSXV: MTZ)
today announced that it has entered into an agreement (the
"Farmout Agreement") under which the Company will drill and
operate five Shaunavon oil well
prospects that were delineated using the Company's extensive 3D
Seismic on its directly held and option lands comprising
approximately 447,000 acres (or 689 square miles) in Blaine &
Hill Counties, Montana.
Drilling Program & Farmout
The Farmout Agreement was entered into with Rioco Partners, Ltd.
("Rioco"), a company managed by Montana Exploration's
largest shareholder, who is also a director and "control person" of
Montana Exploration. Five prospect wells identified by 3D
Seismic will be drilled under the Farmout Agreement, targeting
undiscovered recoverable resources of over 21 million barrels of
oil, with the first well intended to be spudded on or about
October 4, 2016 (the "Drilling
Program"). All five wells will be drilled vertically to
approximately 4,000 feet and are expected to cost approximately
CAD$750,000 per well for a total
program cost of CAD$3.75
million.
Under the terms of the Farmout Agreement, Rioco will pay 100% of
the costs associated with the drilling of each well, plus a
prospect identification fee for each well. In exchange, Rioco
will earn a 75% working interest in each of the drilled
wells. After the five-well project has paid out the costs to
drill, complete, equip or abandon all five wells, Rioco's working
interest in each well will reduce to 50%. Rioco will also
earn a 50% working interest in the acreage associated with each of
the prospects drilled (a "Prospect Area"), which can be
converted at Rioco's election to a 5% gross overriding royalty
prior to the drilling of any development well in the Prospect
Area. Four of the initial prospects to be drilled pursuant to
the Farmout Agreement are on lands held by Montana Exploration and
one is part of the option acreage to be earned by the Company
through a farm-in it has with a large Montana based utility that
was announced on December 1, 2015.
These shallow, low cost oil prospects are economic at below the
current commodity prices of approximately $45 per barrel and economics are competitive with
drilling being undertaken in the United
States in the Permian basin. In addition to completing
the Drilling Program pursuant to the Farmout Agreement, Montana
Exploration remains focused on financing the Company's outstanding
payables and general, administrative, technical and land costs
associated with the Drilling Program implementation.
Seismic Study
The Drilling Program is based on the results of the first phase
of a geophysical study of 286 square miles out of 315 square miles
of 3D seismic data (the "3D Seismic"). The 3D Seismic
covers approximately half of the 447,000 acres of land to which the
Company holds the development rights.
The 3D Seismic has greatly assisted in resolving regional
geology. 3D seismic has only recently been available in the
region where most of the activity has occurred in drilling for gas
in the shallow Eagle and Judith
River sands from 800 to 1200 feet. Although there have
been relatively few local Shaunavon penetrations, more than 20 million
barrels of oil have been produced from offsetting acreage in the
Montana portion of the Shaunavon
trend (Source: Montana Board of Oil
& Gas Conservation). The Company's acreage is an
extension of the Shaunavon trend
north of the border in Canada,
which has produced more than 400 million barrels of oil to date
(Source: Saskatchewan Ministry of Energy and Resources).
The Company has identified over 30 prospect areas on its acreage
so far, in both the Shaunavon oil
and Eagle gas zones, from which five priority targets were selected
for the Drilling Program. On a "pre-drill basis", the five
prospects represent drill targets for undiscovered recoverable
resources of 21 million barrels of oil which has been extrapolated
from the 3D Seismic, comparison to recovery factors from adjacent
pools, and the Company's estimate of reservoir porosity, thickness
and quality from adjacent wells.
Montana Exploration is also using the 3D seismic to evaluate
natural gas prospects in the Eagle and other potentially productive
horizons to support a future gas drilling program as natural gas
prices recover.
ABOUT MONTANA EXPLORATION CORP.
Montana Exploration Corp. is an oil and gas exploration and
production company focusing on the Shaunavon oil and Eagle gas opportunities
underlying its extensive land holdings and drilling rights in the
State of Montana. In the United States, the company operates
through its wholly-owned subsidiary, Montana Land & Exploration, Inc. The
Company's common shares are listed on the TSX Venture Exchange
under the trading symbol "MTZ". Additional information regarding
the company is available at www.SEDAR.com or at
www.MontanaExplorationCorp.com.
Neither the 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.
Resources
There is no certainty that any portion of the resources
referenced in this press release will be discovered. If discovered,
there is no certainty that it will be commercially viable to
produce any portion of the resources.
Forward-looking Statements
This press release contains statements that constitute
"forward-looking information" or "forward-looking" statements"
(collectively "forward-looking information") within the
meaning of applicable securities legislation. Forward-looking
information is often, but not always, identified by the use of
words such as "anticipate", believe", "expect", "plan", "intend",
"forecast", "target", "project", "guidance", "may", "will",
"should" "could", "estimate", "predict" or similar words suggesting
future outcomes or language suggesting an outlook.
This press release contains forward-looking information
including, but not being limited to, the intended date to spud the
first well under the Farmout Agreement, the number of wells to be
drilled, the depth and cost of the wells, the total drilling
program cost and the economics of the Company's oil prospects.
Statements referring to reserves or resources are by their very
nature forward-looking information. Statements in this press
release relating to reserves and resources involve the implied
assessment, based on certain estimates and assumptions that the
described reserves and resources, as the case may be, exist in the
quantities predicted or estimated, and can be profitably produced
in the future. There is no certainty that it will be
commercially viable to produce any portion of such prospective
resources. Other assumptions and qualifications relating to
drilling schedules, costs and other matters are inherent in these
estimates.
This press release contains forward-looking information as it
relates to the Farmout Agreement, including, but not being limited
to, the expected cost of the drilling program, the prospect
identification fee payable to the Company and the economic
viability of the Company's oil prospects. This forward-looking
information is based on reasonable assumptions and estimates of
management of the Company at the time it was made, yet involves
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking information. Such factors include, among others,
risks relating to property interests, the ability of the Company to
obtain required approvals, complete definitive documentation and
complete transactions on the terms announced, the ability of the
Company to complete further exploration activities (including
drilling), the results of exploration activities, risks relating to
oil and gas activities generally, the global economic climate,
commodity prices, environmental risks, and community and
non-governmental actions.
Forward-looking statements and information contained in this
press release are based on our current beliefs as well as
assumptions made by, and information currently available to, us.
Although we consider these assumptions to be reasonable based on
information currently available to us, they may prove to be
incorrect.
By their very nature, the forward-looking statements included in
this press release involve inherent risks and uncertainties, both
general and specific, and risks that predictions, forecasts,
projections and other forward-looking statements will not be
achieved. We caution readers not to place undue reliance on these
statements as a number of important factors could cause the actual
results to differ materially from the beliefs, plans, objectives,
expectations and anticipations, estimates and intentions expressed
in such forward-looking statements.
Furthermore, the forward- looking statements contained in this
press release are made as of the date of this document and we do
not undertake any obligation to update publicly or to revise any of
the included forward- looking statements, whether as a result of
new information, future events or otherwise, except as required by
applicable law. The forward-looking statements contained in this
press release are expressly qualified by this cautionary
statement.
SOURCE Montana Exploration Corp.