Nextraction Energy and Magnum Energy acquire Viking Oil Property in AlbertaFebruary 3, 2011
Acquisition Includes Existing Production and Plans for the
Drilling of 10-12 Horizontal Wells in the Provost Field
Vancouver, BC - Nextraction Energy Corporation (TSX-V: NE) ("Nextraction") is pleased to announce that it has entered into a joint venture with Magnum Energy, Inc. (TSX-V: MEN) ("Magnum") for the acquisition of the 842 hectare Viking oil property located in the Provost Field in eastern Alberta, Canada. Nextraction actively seeks opportunities where production from known fields can be optimized by application of new completion techniques. The Viking oil property clearly presents such an opportunity.
The Provost Field is known for its prolific Viking A formation where vertical wells have produced up to 300,000 barrels of oil per well. In 1968, a unitization study of the Provost Viking A pool was performed by McDaniel Consultants and submitted to the Energy Resources Conservation Board (ERCB). This study indicated that the pool contained over 80 million barrels of oil in place and to date, approximately 3 million barrels of oil have been recovered from the field by various operators, primarily from vertical wells drilled over the past 20 years. The Nextraction/Magnum acquisition accounts for approximately 15% of the lands covered in the Provost Viking A pool identified in the McDaniels report.
Mark S. Dolar, Nextraction's President, stated "the acquisition of the Viking project is a significant addition to our development strategy as it brings the potential to add a multi-million barrel oil asset to our inventory. The recent addition of Calgary based Kent Edney, (P. Eng)., to our management team allowed us to quickly close this deal due to his past experience in the Viking oil play. We can utilize our technical expertise at Viking to develop oil production through both vertical and horizontal wells. We look forward to joint venturing this project with Magnum Energy, who also brings an experienced management team in the development of oil and gas properties in this region of eastern Alberta."
The Viking acquisition includes four producing wells with cumulative average production of 30 barrels of oil per day. Nextraction and Magnum will evaluate the opportunity to increase production volumes of the existing wells by re-completing the wells using modern fracing techniques. Approximate cost for recompletion is approximately $50,000 per well with the objective of increasing production from these wells three to four fold. The acquisition includes 3.25 sections of undeveloped leasehold with the potential to drill an additional 10-12 horizontal wells in the defined pool. Also included in the acquisition are production facilities necessary for further development.
Operators in the Provost field include Penn West Energy, Westfire Energy Ltd., and privately held Mancal Energy Inc. and Cutpick Energy Inc. Horizontal drilling and technological advances in completion methodology has brought a resurgence of interest in the Viking A oil pool in the last two years.
The terms of the joint venture provide for Nextraction and Magnum to acquire the interests from a third private party for $2.8 million, on a 50/50 basis. Nextraction shall fund 100% of the acquisition and receive 100% of the production revenue until payout of the acquisition, or until Magnum has paid Nextraction for its share of the investment. Upon repayment of the acquisition investment, production revenue shall be shared equally by Nextraction and Magnum.
Nextraction shall also pay 100% of the costs to drill and complete two horizontal wells. The wells are projected at 800 meters in depth with a 900 meter horizontal leg, with the first well to commence before June 30, 2011. The preliminary estimated cost for each well is $1.5 million. Revenue from the two horizontal wells is to be shared on a 50/50 basis from first production. Costs and revenues for all subsequent wells will also be shared equally.
Richard Nemeth, President of Magnum, states "Magnum Energy is very pleased to joint venture with a strong financial and technical partner like Nextraction Energy. Both companies share similar corporate strategies. The Viking "A" pool has proved to have good economic returns. We look forward to developing this Viking project with Nextraction."
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 has offices in Vancouver, BC, Calgary, Alberta and Golden, Colorado. 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, a Chattanooga shale gas resource play in eastern Kentucky/Tennessee, and is commencing a project in eastern Montana for Bakken oil.
About Magnum Energy Inc.
Magnum is a junior oil and gas producer with operations located in the Western Canadian Sedimentary Basin. The Company produces from operations in Alberta, and maintains 100% ownership of the Sedalia gas facility in East-Central Alberta.
On behalf of the Boards 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.
Neither the TSX Venture Exchange nor its Regulations Services Provider have reviewed this release and does not accept responsibility for the adequacy or accuracy of this release.
For further information on behalf of Nextraction Energy Corp, please contact: