Petroteq Energy, a fully integrated oil and gas company, is pleased to announce the execution of a definitive agreement for the acquisition of an additional 50% of the operating rights and interests relating to oil sands under US federal oil and gas leases encompassing approximately 8,480 gross acres (4,240 net acres, less royalty) in the State of Utah.
This acquisition, combined with the Company’s acquisition, completed and announced last week of 50% of the operating rights and interests under the same leases, will give the Company 100% of the operating rights for oil sands development under the leases. As previously reported, the lands included in the leases are located in P.R. Springs and the Tar Sands Triangle, two areas that have been designated as “Special Tar Sands Areas” by the U.S. Bureau of Land Management.
Pursuant to the proposed acquisition, TMC Capital, LLC (“TMC”), an indirect wholly owned operating subsidiary of the Company, will acquire from Petrollo LP Corp (“Petrollo”), a Nevada corporation, an undivided 50% interest in the operating rights (working interests) under a federal oil and gas lease located in P.R. Springs and five federal oil and gas leases located in the Tar Sands Triangle. Under each of the leases, the operating rights acquired by TMC will consist of the right to explore for and produce bitumen and heavy oil from oil-impregnated bituminous sands formations located at the surface and at subsurface depths down to 1,000 ft. Under this transaction, the total consideration payable to Petrollo will be US$13 million, with US$1 million payable in cash and US$12 million payable in shares, namely 30 million common shares of the Company, at a deemed value of US$0.40 per share, representing a premium of approximately 33% from the last closing price of the common shares.
The federal oil and gas leases to be acquired in this transaction have been included in notices or applications previously filed with the U.S. Bureau of Land Management (“BLM”) requesting their conversion to new “combined hydrocarbon leases” or “CHLs” under the (U.S.) Combined Hydrocarbon Leasing Act of 1981. This conversion process, once completed by BLM, will create enhanced opportunities for the evaluation and potential development of oil sands resources in these areas.
According to a report titled “Evaluation of Contingent Resources” from Chapman Petroleum Engineering, Ltd. dated December 31, 2018 (the “Chapman Report”), the 50% operating rights and interests to be acquired by TMC under the P.R. Springs lease in this transaction, when combined with the 50% rights and interests previously acquired by TMC under this lease, are estimated to contain gross contingent resources of 90 million barrels of mineable oil/bitumen in place, with an “arithmetic average after risk” estimate, determined on a net basis (discounted by risk and royalty), of 40.77 million barrels of mineable oil/bitumen in place. Based on certain assumptions in the Chapman Report concerning forecasted oil prices and a recovery factor, the mineable resources that are attributable to the interests in the P.R. Spring leases to be acquired by TMC have an estimated “after risk” cash flow value of US$2.23 billion on an undiscounted basis, a cash flow value of US$293.4 million on a 10%/year discounted basis, and a cash flow value of US$166.6 million on a 15%/year discounted basis.
According to the Chapman Report, the remaining 50% of the operating rights and interests in the Tar Sands Triangle leases to be acquired by TMC are estimated to contain gross contingent resources of 41.3 million barrels of in situ oil/bitumen in place, with an “arithmetic average after risk” estimate, determined on a net basis (discounted by risk and royalty), of 20.7 million barrels of in situ oil/bitumen in place. No economic evaluation of the resources contained in the Tar Sands Triangle leases has been conducted.
The Chapman Report was prepared in compliance with the COGE Handbook and NI 51-101 – Standards of Disclosure for Oil and Gas Activities.
“This acquisition is part of the Company’s strategy of acquiring oil sands resources and opportunities in the State of Utah, including federal leases covering lands and areas that have been designated “Special Tar Sands Areas” by the U.S. Government,” stated the Company’s CEO David Sealock
All securities issuable pursuant to the above noted transaction will be subject to a four-month hold period. The transaction is ultimately subject to approval of the directors of the Company and the TSX Venture Exchange.
Source: Company Press Release