Under the terms of the agreement, the JV will not only acquire a substantial 2D seismic data set covering both the San Joaquin Basin and other areas of California, it will also acquire - under lease - up to 50,000 acres in the basin. The JV also intends to drill one exploratory gas well before January next year.
In addition to acquiring 2D seismic, which will cost the company about US$1.2 million, Orchard will contribute US$350,000 to the dry hole costs of the exploration well to earn a 40% working interest. The company said the cost of acquiring land over the first 12 months will not exceed US$1 million with funding to come out of existing cash reserves.
Orchard is targeting acreage which lies adjacent to areas where there has been a range of discoveries of up to approximately 100 billion cubic feet of gas. According to Orchard's independent technical consultants the targeted areas contains prospects with pre-drilling estimates of reserves ranging from 10 bcf to 100 bcf of gas.
"This joint venture will provide Orchard with a range of exploration opportunities for many years to come," said Orchard executive director Stephen Warrener.
"Orchard and NEG have an established relationship having worked as partners on a current drilling campaign in onshore California.
"We were attracted to this joint venture with NEG because the company is a private low cost operator with more than 30 years¹ experience and success in the Californian oil and gas basin."
