CALGARY, Dec. 1, 2015 /CNW/ - Montana Exploration Corp. ("MTZ" or the "Company") (TSXV: MTZ) announced that it has signed an agreement (the "Agreement") with a major regional Utility, to farm-in on approximately 315,000 acres in Blaine and Hill Counties in the State of Montana. Much of this acreage is "held by production" by shallow gas zones, where deeper targets have been significantly under-exploited. Pursuant to the Agreement, the Company will drill Eagle gas wells to produce gas that will be sold to the Utility, and the Company will also explore and develop other oil and gas zones, including conventional Shaunavon oil.
"This farm-in agreement greatly expands our development inventory of conventional oil and natural gas targets that are economic at current oil and gas prices," said Charles V. Selby, Chairman and Chief Executive Officer. "Montana Exploration also now has a strong strategic joint venture partner, with which it has a greatly-expanded land base for conventional oil and gas development and exploration."
Under the terms of the Agreement, the MTZ effectively becomes the drilling partner of the Utility, and is required to drill a minimum of ten wells throughout the farm out acreage within 24 months (the "Initial Drilling Program"), of which at least six must be shallow Eagle gas wells. Following the Initial Drilling Program, the Company can continue to drill throughout the farmout acreage as long as each new well is spudded within 90 days of completion of the prior well.
The Company will pay 100% of all initial drilling and completion costs in exchange for a 100% working interest subject to a 6.25% overriding royalty in the spacing unit of the well before payout of the well and a 75% working interest after pay out. For each non-unitized well drilled, the Company will earn a 75% working interest in between 8 and 15 additional contiguous sections, depending on the depth drilled, Eagle wells are drilled to approximately 1,200 feet and Shaunavon wells are drilled to 4,200 feet.
MTZ will retain operatorship of any oil wells. For gas wells, the Company's partner will pay the tie-in costs, assume operatorship of the wells, and provide a long-term market for all gas produced. The Utility will not pay any of the initial drilling and completion costs, and the Company's focus will be on identifying and developing incremental gas reserves to meet the Utility's long-term system requirements (along with its Shaunavon oil program) rather than further development of existing gas production.
Access to 3D seismic is important in this region for identification of both Eagle gas and Shaunavon oil prospects. MTZ's partner has access to approximately 230 square miles of 3D data and MTZ owns and has access to an additional 85 square miles of 3D data. MTZ can resolve Upper Shaunavon oil targets on 3D seismic.
Within the option area, several of the shallow gas producing areas are complexly faulted. One of the targets will be undrained fault blocks, resolvable on 3D seismic. Over 800 Bcf has been produced to date from the region and MTZ has significant knowledge, experience and understanding of the tectonics of the Bearspaw Uplift to identify incremental gas reserves and production for its joint venture partner.
In conjunction with MTZ's existing land holdings of 132,000 net acres, the Company now has development and exploration rights to approximately 447,000 acres in the State of Montana, on both the Shaunavon oil and Eagle gas trends. The reserves and production potential throughout this acreage presents substantial upside to the Company's shareholders.
ABOUT MONTANA EXPLORATION CORP.
Montana Exploration Corp. is an oil and gas exploration and production company focusing on the Shaunavon oil and Eagle gas opportunities underlying its extensive land holdings and drilling rights in the state of Montana. In the United States, the company operates through its wholly-owned subsidiary, Montana Land & Exploration, Inc. The company's common shares are listed on the TSX Venture Exchange under the trading symbol "MTZ". Additional information regarding the company is available at www.SEDAR.com or at www.MontanaExplorationCorp.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Montana Exploration Corp.
Charles Selby, Chairman and Chief Executive Officer or Donald Foulkes, President, by telephone at +1.403.265.9091 or by mail at 2300, 144 4th Ave. S.W., Calgary, Alberta T2P 3N4.Copyright CNW Group 2015