Lonestar Resources, Ltd. (ASX: LNR, OTCQX: LNREF) is pleased to announce that it has reached definitive agreements to acquire leasehold associated with approximately 6,122 gross / 4,047 net mineral acres in La Salle County, Texas. Lonestar’s independent engineering consultants estimates that Proved net reserves associated with these properties are 2.7 million barrels of liquids and 11.0 billion cubic feet of natural gas, or 4.5 million barrels of oil equivalent (MMBOE). More importantly, Lonestar’s third party engineering consultants estimate that Proved and Probable net reserves associated with the purchase are 6.4 million barrels of liquids and 26.3 billion cubic feet of natural gas, or 10.8 MMBOE. The addition of this leasehold adds 32 gross / 20 net horizontal Eagle Ford Shale drilling locations to Lonestar’s drilling inventory. At year-end 2014, Lonestar held interests in 143 engineered Eagle Ford Shale drilling locations. This acreage is in two blocks and is in different parts of La Salle County, Texas:
- Greater Burns Ranch- Lonestar has added 1,720 gross / 1,225 net acres, in the Greater Burns Ranch area of northern La Salle County. This acquisition represents the third bolt-on deal closed since Lonestar established a footprint on the Burns Ranch when it acquired interests from Clayton Williams Energy, Inc. in March, 2014. Lonestar expended $2.1 million to acquire all of the working interests it did not previously own in 960 gross / 480 net acres, which holds 9 gross / 4 net Eagle Ford drilling locations with lateral lengths of 8,000 feet, and acquired interests in 760 gross / 745 net acres in offsetting acreage which may hold as many as 4 additional Eagle Ford drilling locations. The purchase also adds net production of 33 barrels of oil equivalent per day (BOEPD) from 5 Austin Chalk wells, which hold all of the leasehold by production. Lonestar’s independent engineering consultants estimate that Proved net reserves associated with the purchase are 0.5 million barrels of liquids and 0.6 billion cubic feet of natural gas, or 0.6 million barrels of oil equivalent (MMBOE). Lonestar’s independent engineering consultant estimates that Proved and Probable net reserves associated with the purchase are 1.3 million barrels of liquids and 1.6 billion cubic feet of natural gas, or 1.6 MMBOE.
- “Horned Frog”- Lonestar has executed a farm-in agreement via which we will acquire working interests in 4,402 gross / 2,822 net acres in west central La Salle County. This acreage, which is in a contiguous block, affords Lonestar the potential to drill a minimum of 19 gross / 12 net horizontal wells with lateral lengths of approximately 8,000 feet. The agreement calls for Lonestar to drill two wells in 2015 to hold this leasehold. Lonestar’s independent engineering consultant estimates that Proved net reserves associated with the farm-in are 2.1 million barrels of liquids and 10.4 billion cubic feet of natural gas, or 3.9 MMBOE. Lonestar independent engineering consultant estimates that Proved and Probable net reserves associated with the farm-in are 5.1 million barrels of liquids and 24.7 billion cubic feet of natural gas, or 9.2 MMBOE. Additional reserves upside lies in the 1,580 net unleased net mineral acres on the block. Lonestar believes that it is in an excellent position to acquire these working interests associated with this tract, which would increase these reserves estimates by approximately 50%.
Frank D. Bracken, III, Lonestar’s Managing Director and Chief Executive Officer commented, “These transactions reflect the successful execution of our strategy in the current oil price environment. Lonestar is focused on adding leasehold and reserves in the Eagle Ford Shale play, but doing so principally with the drillbit in order to conserve its liquidity. Lonestar’s flexible capital program has allowed it to defer wells that were part of our initial 2015 budget in favor of 5 wells related to its farm-in agreements on its South Gonzales project and now at Horned Frog, thereby adding significant new leasehold and reserves with no incremental capital outlay.”
Pursuant to ASX Listing Rules (“LR”) the reserves information in this document:
(i) is effective as at 1 February, 2015 (LR 5.25.1)
(ii) has been estimated and is classified in accordance with SPE-PRMS (Society of Petroleum Engineers – Petroleum Resources Management System) (LR 5.25.2)
(iii) is reported according to the Company’s economic interest in each of the reserves and net of royalties (LR 5.25.5)
(iv) has been estimated and prepared using the deterministic method (LR 5.25.6)
(v) has been estimated using a 6:1 BOE conversion ratio for gas to oil, pursuant to the information in the disclaimer section of this document (LR 5.25.7)
Other Reserves Information:
Lonestar operates most of its properties which are generally held by standard oil and gas lease arrangements. Detailed information on the operator and lease arrangements is disclosed in the Company announcement related to the initial acquisition of properties. The Company’s working interest ownership (WI%) and netrevenue interest ownership (NRI%) in relation to each of its properties are generally included in the Company’s presentations which are available on the ASX or the Company’s websites. Well spacing assumptions and lateral length assumptions are generally included in the Company’s presentations as is additional information on capital cost and taxation assumptions. In accordance with ASX LR 5.43 the Company confirms that it is not aware of any new information or data that materially affects the reserves information included in previous Company announcements including as to material assumptions and technical parameters underpinning the estimates, other than as set out in this announcement.
Qualified Petroleum Reserves and Resources Evaluators:
In accordance with ASX Listing Rules 5.41 and 5.42:
The reserve reporting provided in this document in relation to the Company’s Eagle Ford Shale properties is based on and fairly represents information and supporting documentation that has been prepared by Mr. William D. Von Gonten, Jr., P.E., and Mr. Taylor D. Matthes, P.E. who are employed by W. D. Von Gonten & Co Petroleum Engineering. Mr. Von Gonten holds a Bachelor of Science degree in Petroleum Engineering from Texas A&M University and Mr. Matthes holds a Bachelor of Science degree in Petroleum Engineering from Texas A&M University. Both of these persons are Registered Texas Professional Engineers. Mr. Von Gonten has 24 years of experience as a Petroleum Engineer and Mr. Matthes has more than 5 years of experience as a Petroleum Engineer. Both of these persons are members of the Society of Petroleum Engineers. Messrs. Von Gonten and Matthes have consented to the inclusion in this document of the information and context in which it appears.
Reserves Cautionary Statement:
Hydrocarbon reserves and resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates that were valid when originally calculated may alter significantly when new information or techniques become available. Additionally, by their very nature, reserve and resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional drilling and analysis, the estimates are likely to change. This may result in alterations to development and production plans which may, in turn, adversely impact the Company’s operations. Reserves estimates and estimates of future earnings are, by nature, forward looking statements and subject to the same risks as other forward looking statements.
Commodity Pricing Used:
Lonestar’s reserves and PV-10 have been estimated using index prices determined in accordance with US SEC pricing guidelines for oil and natural gas, without giving effect to derivative transactions, and were held constant throughout the life of the properties. The unweighted arithmetic averages of the first-day-of-the-month prices for the year ended December 31, 2014 were $94.99 per bbl for oil and $4.35 per mmbtu for natural gas. These prices were adjusted by lease for quality, energy content, regional price differentials, transportation fees, marketing deductions and other factors affecting the price received at the wellhead.”