I am a minority ownership Member of a Company operating in South Texas. Along with the other members we removed the Manager and Operator and I am now the Managing Member.. I have worked with the geological team, and we have been able to receive a farmout from a large independent along with our own small acquisition. We currently also have three wells that can we worked over for $350,000 and should produce 50 to 70 barrels per day cumulatively. Additionally, on this same property there is one new drilling location. The new drill to the tanks should cost $1,300,000. Reserves are estimated to be 272,000 recoverable barrels. An Adjacent property we can lease has one location and we estimate the recoverable barrels are 429,000 and the cost of drilling and completing the well is $650,000.
The workover wells should have estimated recoverable reserves exceeding 250,000 barrels.
The current farmout is on 2,700 acres and has 10 identified drilling prospects. Our farmout partner has approved 5 of the 10 prospects and once drilled we can move to the remaining 5. Upon the acceptable execution there is 40,000 acres with over 50 prospects.
Why do we have this deal? Most of the members are not professional oil and gas investors and do not want to fund any additional activity but also do not want to be diluted. On this basis they have talked with a few possible industry participants and have settled on an acceptable interest in the wells that they would move forward with a Working Interest Operator.
The trade: NewCo will assume the responsibility of reworking the three possibly 4 wells and plug three wells. New Co will find an Operator and a JV partner to participate in the wells and operate. We will carry the Current Company to production in to the tanks for a 5.0% WI and an additional 10.0% WI after payout. We will do the same on the new drill on the location and the adjacent well. We will also do the same on the first five wells on the farmout. After that they will be heads up participant.
Use of Funds:
| Workovers | $350,000
| Water Line to SWD | 50,000
| Plug 3 wells | 150,000
| Drill Well on Location | 250,000
| Drill Well on Adjacent Location | 250,000
| Participation in 5 Farmout Wells | 1,250,000
| Working Capital | 400,000
| Funding Required | $2,700,000
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