Samson Oil and Gas USA Inc., a wholly owned subsidiary of Samson Oil and Gas Ltd., has provided an update of its pending acquisition to acquire oil and gas leases, producing oil and gas wells, currently shut-in wells and associated facilities in North Dakota and Montana for consideration of $16.5 million. That acquisition was due to close on Feb. 15, but Samson says that the continuing volatility in petroleum markets has prevented the company from concluding arrangements for financing of the acquired assets with its primary lender.
While Samson remains optimistic that it will obtain the necessary financing and close the acquisition, its failure to meet the Feb. 15 deadline entitles the seller to terminate the purchase agreement at any time. Samson currently expects that the necessary financing will be obtained on or before Feb. 29, and that the seller will close the sale on that date. There can be no assurance, however, that the seller will not exercise its right to terminate before Samson obtains the funds needed and closes the transaction.
The original purchase price was based upon petroleum prices in the fourth quarter of 2015, which were higher than current prices. Given this decline, it was necessary for Samson to reexamine and revise the expected lifting costs associated with this asset and to then reestimate the reserves associated with the acquisition. The original reserve estimate used, as is normal industry practice was the historical cost incurred by the current owner. The oil service industry has responded to the lower oil price environment by generally lowering the cost of services. As a result, Samson has obtained contract proposals for well operations which reduces the estimated cost per well.
As a consequence of this and other initiatives, including an advantageous crude marketing arrangement, Netherland Sewell, & Associates Inc. has estimated that the properties contain proved reserves of 6.7 million barrels with a net present value of $51.648 million, as at Oct. 1, 2015, the effective date of the transaction, and based on current NYMEX strip parameters.