9 May 2016 07:00
Regency Mines PLC
("Regency" or the "Company")
Participation in Auction to Acquire Wyoming Oil Assets
09 May 2016
Regency Mines, Plc, the natural resources exploration and investment company with interests in oil and base metals announces a Heads of Agreement ("HOA"), non-binding and subject to transaction documentation, entered into between a private U.S. oil and gas company ("US Partner" or "Operator") and Regency's wholly owned United States subsidiary, Regency Resources, Inc ("RRI") to bid in an auction process under a Chapter 7 bankruptcy proceeding for a 75% non-operating working interest (net revenue interest to Regency of 60%) in an existing well ("Well") located in the prolific oil producing State of Wyoming.
The Well was recently drilled, logged and cased, at a cost in excess of US$4m, but was not perforated by the previous ownership group following financial difficulties and the sector downturn. The Well is being sold by a court appointed Trustee pursuant to a Chapter 7 proceeding under U.S. bankruptcy law.
The Operator has calculated from modern well logs that the Well has more than 470,000 barrels potentially recoverable behind-pipe in multiple stacked pay zones, with more than 150,000 barrels potentially recoverable in the two deepest pay zones that will be completed initially. The target identified by the Operator is 29 million barrels of potentially recoverable oil within the entire acreage position.
Five producing fields are located within 1 to 10 miles of the Well. The surrounding fields all produce from one or more of the same zones that appear productive on logs in the Well.
If RRI and its US Partner are the successful bidder at the bankruptcy sale, Regency will also acquire a 75% interest in its US partner's right to earn more than 9,000 net and gross acres of oil and gas leasehold interests surrounding the Well by drilling and completing additional productive wells on the acreage. The area is covered by a modern, proprietary 3D seismic survey.
Pursuant to the HOA, Regency will carry its US partner for a 25% working interest in the completion of the Well and the next two wells drilled on the surrounding acreage. Thereafter, the costs will be met as to 75% by Regency and 25% by the US partner. Regency is currently budgeting a commitment of under US$1M for the process and has agreed to pay the US partner a "prospect fee" of US$100,000 on the successful acquisition of the interest. Should costs materially exceed these amounts Regency would expect to bring in partners to the investment.
To proceed, Regency intends to rely on current assets, existing drawdown facilities and potentially other financing options.
The US Partner/Operator is a private Central United States based independent oil and gas company with extensive experience in the Rocky Mountain region and other major producing regions within the United States.
The identity of the Company's US Partner cannot currently be released due to competitive reasons associated with the auction, however this information will be announced upon award of a successful bid.
Andrew Bell, Regency's Chairman commented: "While we can provide no assurance that we will be the successful bidder at the bankruptcy sale, this is an opportunity for Regency to acquire a sizeable and good class of oil and gas asset in an established oil producing region for cents on the dollar.
We feel that this opportunity is an important one for Regency's future and we intend to concentrate significant managerial and financial resources on this bidding process. The Board feels that establishing a foothold in low cost, onshore US oil and gas development while the sector is depressed is the optimal strategy in current conditions and offers outsized potential returns to shareholders.
We are looking at other onshore oil and gas assets coming out of bankruptcy and insolvency situations. Although we cannot expect to succeed in consummating a transaction in every case, we believe we can succeed in some, and even one might be transformative for Regency.
We look forward to working with our US Partner on acquiring and developing this exciting project and due to the sensitive nature of the bidding process will make additional announcements as appropriate. We will keep the market updated on progress."
For further information, please contact:
Andrew Bell 0207 747 9960 Chairman Regency Mines Plc
Scott Kaintz 0207 747 9960 Executive Director Regency Mines Plc
Roland Cornish/Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Jason Robertson 0129 351 7744 Broker Dowgate Capital Stockbrokers Ltd.