Rose Petroleum buys in to McCoy lease in Colorado

(Sharecast News) - Rocky Mountain-focussed oil and gas company Rose Petroleum has entered into a letter of intent with Captiva Energy Holdings II (CEH) for the proposed acquisition of an initial 10% of CEH's 89.5% net working interest in the 317-acre McCoy lease, located in the Denver-Julesburg Basin (DJ Basin) in Weld County, Colorado, it announced on Monday.
The AIM-traded firm said that in addition, the firm would have an option to acquire, at its sole discretion, up to a further 80% of CEH's 89.5% working interest in the McCoy lease.

Its directors said they considered that the proposed acquisition would provide Rose with near-term, low-risk horizontal development drilling exposure in the prolific Niobrara shale play, and on acreage contiguous to other major DJ Basin operators including Occidental Petroleum Corporation, Great Western Operating Company and Crestone Peak Resources.

The DJ Basin was described as a "mature oil basin", currently undergoing a resurgence as vertical production was replaced with successful one and two-mile horizontal well developments.

It said the McCoy lease was located in an active part of the DJ Basin, and a horizontal redevelopment of the existing productive lease was proposed, with a forecast start date in mid-2020 for an initial 12-well drilling programme with up to two-mile long laterals.

The company said it expected to shortly conclude an equity fundraising to raise up to £1.25m at 1.1p per share, and a portion of the proceeds from the placing would be committed to the acquisition.

"The DJ Basin is a world-class, liquids-rich resource play with over 4,000 horizontal wells drilled to date," said Rose Petroleum chief executive officer Colin Harrington.

"There is significant infrastructure in place with available capacity, and ready access to service providers and contractors.

"Rose's new management team, as well as that of our partner CEH, has significant experience delivering production from horizontal development in close proximity to the McCoy lease."

Harrington said the proposed acquisition and associated option was the first in a series of expected deals, designed to build value via attractively priced, low risk assets which could deliver production in the short term.

"We believe the McCoy lease will be an excellent addition to the Rose portfolio and will both complement and balance our newly restructured Paradox Basin appraisal asset.

"I look forward to updating the market on our progress as we build and grow our asset portfolio."

As at 1011 GMT, shares in Rose Petroleum were down 4.23% at 1.24p.