Nextraction Energy and Primary Petroleum form Oil Joint Venture in MontanaDecember 17, 2010
Vancouver, BC - Nextraction Energy Corporation (TSX-V: NE) ("Nextraction") is pleased to announce that it has entered into a Seismic and Farmout agreement with Primary Petroleum Company, LLC, a wholly owned subsidiary of Primary Petroleum Corporation (TSX-V: PIE) ("Primary") whereby Nextraction can earn an interest in Primary's 20,000 acre Saturn Prospect located in Daniels County, Montana. The property hosts the highly prospective Mission Canyon, McGowan, Bakken and Three Fork formations. Nextraction will earn its interests in exchange for funding 3-D seismic work and the completion of wells to exploit these formations.
The target of the initial phase of the Joint Venture is the western Bakken fairway of the Williston Basin in northeastern Montana. The Williston Basin is a productive basin in Montana and Saskatchewan. Horizontal drilling for oil on the Bakken formation in Montana, North Dakota and Saskatchewan has opened up new potential for large scale oil reserves.
Mark S. Dolar, President of Nextraction, said "We are able to use our strong technical skills in shale recovery methods to maximize the value of the leases that Primary has skillfully acquired at an early stage as the new knowledge has evolved about the recovery potential on the Bakken formation. Nextraction's business focus is to target the next round of extraction on known plays for gas and now oil as well."
"This is an agreement designed to benefit both Nextraction and Primary as we explore and develop the Bakken shale oil trend in northeastern Montana. Primary has done excellent work to acquire valuable leasehold positions along the Bakken trend and we look forward to starting work in this prospective region" stated Mr. Dolar.
"This Joint Venture is an important turning point for Primary Petroleum. This agreement with an experienced industry partner like Nextraction is a key milestone for our Company. Having successfully acquired substantial land positions in two of North America's unconventional tight oil plays, in the Williston Basin and the Southern Alberta Basin in Montana, Primary is now executing its business plan to find key Industry partners to exploit its land holdings." states Mike Marrandino, President and CEO of Primary Petroleum. "We look forward to working with Nextraction on the exploitation and development of our Saturn Prospect in 2011 and beyond."
Summary of the terms under the agreement include:
- The Joint Venture will shoot a 15,000 acre 3-D seismic program whereby Nextraction funds 75% and Primary funds 25% of the data collection costs. Costs are estimated at $500,000 - $650,000 to conduct the seismic program.
- Nextraction will operate the project and immediately drill a vertical well to test and core the prospect formations by April 15, 2011. Prior to commencing the well, Primary will have the option to participate as a 25% interest owner. Should Primary participate in the drilling of the well, the before payout interests will be shared 75% by Nextraction and 25% by Primary; after payout interests will be shared 52.5% by Nextraction and 47.5% by Primary. If Primary does not participate in the well, Nextraction will own 100% before payout and 70% after payout, subject only to an overriding royalty to Primary until payout, with Primary owning a 30% interest after payout.
- Upon rig release of the first test well and within 90 days Nextraction will commit to drilling either two verticals or one horizontal well. Earning terms are identical to the first well.
- Nextraction will earn (a) the spacing unit drilled; (b) a 70% interest in the 640 acre section containing the spacing unit; (c) one adjacent 640 acre section for each vertical well drilled (d) a 70% interest in the 640 acre section which contains the spacing unit and (e) three adjacent 640 acre sections for each horizontal well drilled under earning terms identical to the first well.
- Nextraction then has the option to invest an additional $10 million dollars in net drilling capital over the next two years to develop the Saturn Prospect and by doing so will earn a 50% interest in the remaining portions of the 20,000 acre Saturn lease block as well as the opportunity to participate with Primary in other prospects.
About Nextraction Energy Corp.
Nextraction Energy Corp. is a Canadian junior oil and gas producing company engaged in the exploration and development of oil and gas resources in North America. Nextraction targets projects with known reserves and plays that provide lower risk, high return development opportunities in both conventional and unconventional resource projects, where our technical expertise can be applied to enhance production. The Company is headquartered in Vancouver, BC, Canada. Nextraction has current gas production and is currently developing a multi well tight-sands gas play on the Pinedale Anticline in the Green River Basin region of western Wyoming, and a Chattanooga shale gas resource play in Eastern Kentucky and Tennessee.
About Primary Petroleum LLC
Primary is a junior oil and gas company engaged in exploration and development activities in Montana and Alberta and currently holds substantial land positions in two unconventional tight oil plays in North America; the Saturn Prospect in the Williston Basin and the Pondera-Teton Prospect in the Southern Alberta Basin . The Company's mandate is to continue to acquire strategic land positions of merit in the Sedimentary Basin of the Western United States and Canada and seek out qualified industry partners to exploit and develop them.
On behalf of the Board of Nextraction Energy Corp.
"Mark S. Dolar"
President and CEO
FORWARD LOOKING STATEMENTS DISCLAIMER
Certain statements in this document may contain "forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation. Such forward-looking statements or information include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. The Company does not assume the obligation to update any forward-looking statement, except as required by applicable law.
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Nextraction Energy Corp.
Toll Free: 1-888-630-0370