Comet Ridge today said it would retain a 26% working interest in the project.

Financial details of the transaction are confidential, but the company said total consideration for the acquisition is about $US650,000 ($A844,189). This will comprise an upfront cash payment, 100% of the costs of acquiring four square miles of 3D seismic and 100% of the costs of drilling one directional well to around 4000 feet (1200m).

Should there be a successful initial well, the JV partners would share 100% of the revenue until they have recovered 135% of the intangible drilling costs as well as 100% of the operating costs.

Comet said after the JV partners recover the above costs, the sellers will “back-in” for a 22% working interest in the well and the partners’ share of the revenue and operating costs will drop to 78%, equating 26% each.

Comet’s wholly owned US subsidiary acquired a 78% working interest and operatorship of 4678 acres (2023.4 hectares) of the historic Florence oil field earlier this month for $650,000.

Located about 140km south of Denver and 40km west of Pueblo, the oil field has produced about 15 million barrels (MMbbl) of oil since its discovery in 1862.

Comet plans to target recoverable oil reserve potential of between 1MMbbl and 2MMbbl with “substantial exploration opportunity” existing in the Niobrara Formation and deeper targets.

Under the agreement, drilling operations are required to begin by August 1, 2007.