AMERICAN Patriot Oil and Gas says an agreement to acquire some new US assets is a “company changing” deal.
The ASX-listed junior recently executed a Letter of Intent (LoI) with two private US companies to acquire 100% of those companies’ oil and gas assets.
The transaction includes 22,311+/- net acres in Utah in Grand and San Juan Counties and 356 net acres in Texas in Gaines County.
The purchase includes over 23 well bores and 90 barrels of oil equivalent per day (boepd) of existing conventional production with the ability to grow production to over 800 boepd by mid-2017 for minimal capex spend restarting shut in production.
American Patriot will also acquire key strategic mid-stream assets: an existing gas plant and a 25-mile pipeline previously developed by Delta Petroleum within the prospect.
The selling companies also deliver minimum reserves of 3.2mmbbl oil and 6,700 mmcf gas 1P Reserves.
“This is a landmark transaction for American Patriot to acquire Paradox and Permian Basin Oil and Gas assets fundamentally transforms the company putting it on the path to becoming a significant US oil production company with substantial mid-stream strategic assets,” the company’s CEO, Alexis Clark, said.
“The production will generate immediate cash flow when the transaction is closed and the cash flow from these assets will put us on the path to being cash flow positive by the end of 2016.
“To acquire theses key production and mid-stream strategic assets of the Gas Plant and Pipeline positions American Patriot well to develop a significant oil and gas production business including the ability to charge third party providers and generate tolling revenue.
“This is a once in a generation opportunity for American Patriot as if it wasn’t for today’s low oil price environment and the strict criteria oil bankers have, a company like us would rarely have an opportunity to acquire assets like these or any other assets we are looking to acquire. By undertaking an all stock transaction the sellers are also clearly demonstrating their belief in the asset and the management team at AOW as they want to realise the significant upside these assets can deliver within AOW.
“This strategy has the potential to deliver significant value for AOW shareholders particularly given the number of attractive distressed producing properties we have been introduced to.
“This is the first acquisition of many and we have a number of target assets in the pipeline, as we look to deliver on the strategy of aggressively building a significant producing conventional oil business with well over 5000bopd production”
“We now have 90boepd of oil production which will generate immediate cash flow with the ability to grow this quickly to over 800bopd by the mid-2017 and potentially double that by end of 2017 by quickly restarting shut in production at low cost to the company. This is all underpinned by a certified 1P reserve base of 3mmbbl oil and 6,700 mmcf gas which is also expected to grow,” Mr Clark said.