wolfcamp oil resource play acquisition, texas, page-2

Molopo has entered into an agreement with a private Texas based oil and gas company to acquire a land position totalling 15,000 net acres (26,900 gross acres) within the emerging Wolfcamp oil resource play in Texas, USA. Molopo has the potential to add another 8,500 net acres via additional leasing, having already acquired an option on 4,100 net acres within the target area.

Molopo’s Managing Director, Mr Stephen Mitchell, said: "For a very small capital outlay and modest work commitments, Molopo has positioned itself in another exciting and emerging oil resource play that, if successful, could have a major impact on the company’s future reserves, production and cash flow. The Wolfcamp acquisition reinforces Molopo’s strategy of targeting significant stakes in tight oil opportunities early in the evolution of the play."

The Wolfcamp Formation has historically been a proven source rock and occasionally an additional production interval for developers who target the shallower Spraberry Formation in West Texas. More recently, a number of companies including major independents such as EOG, Devon and El Paso have started to target the Wolfcamp Formation as a productive interval in its own right. The latter recently paid some $175 million for approximately 120,000 acres of Wolfcamp acreage located within 10 miles of Molopo’s target area.

Over the acreage identified by Molopo and its partner, the Wolfcamp is present across a vertical depth range of 5000-8000 ft. Total gross thickness of the interval is approximately 2000 ft and is believed to contain several prospective sequences in the Upper, Middle and Lower Wolfcamp. Additional oil and gas targets exist in both shallower and deeper sequences offering potential for additional hydrocarbon reserves and production potential.

The initial lease terms will be three years with minimal initial work commitments in the first 12 months. It is expected that Molopo’s minimum commitments during the first 18 months will be approximately $2.5m.

The Wolfcamp yields a light sweet oil which generally achieves or surpases WTI Cushing parity. Gas produced in the area has ready access to export pipeline infrastructure and generally achieves a US$2.00 per Mscf premium to NYMEX Natural Gas prices because of its significantly higher heating value.