LONDON (Alliance News) - Highlands Natural Resources PLC on Friday said it has executed a farm-in deal to increase the size of its existing East Denver oil and gas project in Colorado's Araphoe County.
The new farm-in will allow drilling to take place on three additional sections, covering 640 acres, near the original three sections Highlands took on from Renegade Oil & Gas Co LLC in July. The new acres have been bought from a US-listed oil and gas company which Highlands did not name.
Highlands said the agreement will require it to drill six extended horizontal wells and to start drilling work by September 1, 2017.
Highlands has made no upfront payment to take on the new area but will pay a non-performance fee capped at USD150,000 per well if no drilling takes place. Highlands will bear the full costs of drilling and control of the wellbores when each is completed.
After a well 'pays out', by returning all the costs associated with the drilling and operation to Highlands, the seller will have an option to take a 3.0% overriding royalty interest or to convert its initial royalty interest into a 50% working interest in the wells.
Shares in Highlands were up 1.6% at 32.00 pence on Friday.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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