This follows Comet Ridge’s announcement last Tuesday that it had taken operatorship and a 75% interest in the historic fields on the Tow Creek anticline in Routt County.
Under the agreement, Strike Oil will pay one-third of the total leasehold costs – about US$850,000 – as well as the drilling of two wells.
Strike was entitled to take part in the project by virtue of its participation in the Rocky Mountain Joint Venture. The third partner in that agreement, directional driller AJ Lucas, is also likely to buy in.
This was the first of a number of properties targeted for acquisition and was the result of technical studies funded equally by both companies, said Strike Oil.
Comet Ridge, which will receive a 60% revenue in the project, said it believed considerable oil remained untapped in the structure and it will use directional drilling to re-establish oil production in the fields and surrounding areas.
This would be the first time Comet Ridge has worked as operator on a US property.
Comet Ridge will pay US$697,000 in two instalments to Houston-based Ponder Exploration Ltd, which will be granted a free carry through of US$150,000 in additional leasing costs and the drilling of two wells.
Following the Rocky Mountain Area of Mutual Interest signed in July this year, Comet's partners – AJ Lucas Group and Strike Oil – had the right to participate, which could see Comet eventually hold a 25% stake and 20% net revenue interest in the project.
AJ Lucas' directional drilling expertise would be central to the project.
Initial production began in the mid 1920s from the fractured shale intervals in the Cretaceous-aged Niobrara Formation, but the area has seen little activity since the 1970s and 80s, the company said.
In addition to the oil potential in the Niobrara Formation, strong oil and gas shows have been seen in deeper conventional reservoirs on the structure, said the company, which also expects further potential for coalbed methane gas development to exist in the shallower Williams Fork Formation coals.
There are seven named oil fields on the Tow Creek structure that have collectively produced in excess of 5 million barrels, with all, or part of four, of the fields located on the acquired leases.
One notable well – which is an immediate offset to one of the acquired leases – started production at over 900 BOPD, said the company.
Geological, geophysical and reservoir engineering studies will now start in preparation for drilling in the second quarter of 2006.
