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(Sharecast News) - Oil exploration, development and production company Mosman Oil and Gas has executed contracts to acquire an additional 80.83% working interest of the Cinnabar Lease in East Texas for £62,500 cash, it announced on Monday, increasing its working interest to 97%.
The AIM-traded firm said the Cinnabar Lease is a 348.83 acre lease held by production, which forms part of the Challenger Project, in which it has a 16.17% working interest.
It said the Challenger Project is located in East Texas, between Mosman's Stanley and the Champion Projects, where drilling was just completed at the Falcon-1 well.
Mosman acquired 32.33% working interest from Nadsoilco, 32.33% from Clendon Clairem and 16.17% from Baja Oil & Gas.
The remaining 3% working interest is held by a third party, with Baja in the process of acquiring it.
Completion of the third party transaction was expected to take a few weeks.
Mosman said there were four development drilling locations on the Cinnabar Lease identified using nearby wells and 3D seismic methods - the same methods used to identify the targets at Stanley and Falcon.
There were two wells drilled in the lease, which had produced "significant" quantities of oil but were now shut-in.
The current Operator, Nadsoilco, maintained the Lease as 'held by production' by periodically opening one of the wells to produce a few barrels of oil.
As a result, in recent years there had been no material production, profit or revenue from the lease.
Mosman said it would review operations and the possible workover of one or both of the wells to increase production.
The company said it would become the operator of the Cinnabar Lease, with contract operator services to be provided by Contour Exploration and Production, owned by Howard McLaughlin.
Mosman said it already had 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 services on the Cinnabar Lease, Mosman said Contour may earn a 12% working interest in the lease when a well is drilled, carried by Mosman to a cap of $96,000.
The board said the acquisition would enable the company to continue to build its production base in Texas.
At the same time, it said its immediate priorities were 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.
"This acquisition to increase our working interest in the Cinnabar Lease to 97% paves the way for the next stage of growth for Mosman," said chairman John Barr.
"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."
At 0829 GMT, shares in Mosman Oil and Gas were down 2.91% at 0.13p.
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