The two Perth-based juniors said today the combined group – to be called Alto Energy – would have a fully funded 40-well initial drilling program and near-term production that would generate strong returns from current high US gas prices.
In addition, Alto would have a significant and growing acreage portfolio and the right to earn interests in 79,000 acres (31,970 hectares) and 1000 well sites in the Appalachian Basin, one of the most prolific natural gas regions in the US. Several new projects were currently under evaluation, LDR said in a statement this morning.
LDR business director, Andrew Dimsey, told Energyreview.net the merger was a logical progression for the companies.
“Both of us operate in the same area of the US with similar gas projects,” said Dimsey.
“We’re both relatively new companies – Alto is an unlisted private company, while Lach Drummond is listed on the ASX.
“Plus, there was a compelling economic argument to merge in light of the high US gas prices.”
Dimsey also said the merger provided Alto with a shareholder listing and Lach Drummond “scale to grow its business”.
Alto has already participated in the drilling and completion of five wells, which were producing flows averaging 130,000 cubic feet per day in the Koppers North project in Tennessee and were expected to reach production this week, the report said. The company will also take interests in East Kentucky’s Little Sandy/ Pigeon Roost project into the merger, as well as a West Virginian project.
The proposed merger also follows LDR’s recent acquisition of a 50% interest in the Home Run gas project in East Kentucky.
“The combined companies will have working interests in nearly 80,000 acres, which is a good kick-off for the new one to move ahead,” said Dimsey.
Looking ahead into the next two years, Dimsey said the company was evaluating new projects in the US to obtain 200,000 acres, while maintaining an ongoing commitment to its existing ones.
The merger proposes the current Alto directors and an LDR executive be appointed to the board of the new company. Gregory Channon will be appointed as chief executive officer and managing director, while Charles Morgan will occupy the non-executive chairman position.
Several candidates had also been identified for the appointment of a US-based director with significant US oil and gas experience, said the company statement.
