Samson Oil &Gas Limited (ticker: SSN) is an independent oil and gas company with dual listings on the Australian ASX and the NYSE. However all of the company’s assets and operations are based in the United States, focused on the oil-prone Niobrara and Bakken formations.
On June 24, 3013, the company made a strategic disposition by selling its 30,000 net acre position in Montana, known as the Roosevelt Project, for $13.533 million in cash, to an undisclosed buyer. In addition to the undeveloped acreage, SSN’s interests in the Australia II, Gretel II and Abercrombie wells and their associated leases were also included in the sale.
The sale is expected to close in July 2013.
Use of Proceeds
Samson plans to reinvest the net proceeds from this transaction into drilling infill wells in the company’s existing producing asset, the North Stockyard field. We view this strategic move as a positive since it allows SSN to allocate capital from an unproven project, towards de-risked assets in its proved North Stockyard field. The field has has strong current production rates and holds the potential for an additional 14 horizontal wells targeting the Bakken and Three Forks formations. A map of the company’s North Stockyard Field asset is below. As you can see, SSN is well surrounded by top-tier Bakken operators.
Terry Barr, CEO of Samson Oil & Gas Limited told Oil & Gas 360, “We paid around $200 per acre when we first purchased the land. We just sold it for $450 per acre, making a profit off of the land rights.”
Overall, we are encouraged by SSN’s move to rationalize its portfolio of non-core assets to build near-term value by drilling in its de-risked North Stockyard field.
Samson Oil & Gas Limited is not a land bank, or a company that likes to buy and flip properties; however, oil and gas companies occasionally have to high grade their portfolios and allocate capital to less risky projects with greater rates of return. Samson has six locations ready for infill drilling on 160 acre spacing in the North Stockyard field and a total of 14 horizontal Bakken and Three Forks locations providing near-term operational upside that will likely lead to increases in production and cash flow that can be reinvested in Samson’s other projects.
We note that Samson’s capital budget for 2013 is $25 million, which is includes six infill wells in North Stockyard. The net proceeds from the asset sale combined with cash of $16.4 million at March 31, 2013 and $2.9 million raised from a rights offering to existing shareholders completed in Q2’13 provide a higher level of comfort that Samson can fund its growth plan.
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