Source: Samson Oil & Gas
Samson Oil & Gas Limited (NYSE:SSN) has entered into a binding agreement with a large U.S.-based independent natural gas and oil producer to sell 24,166 acres of its 40,240 acre holdings in Goshen County, Wyoming, for a cash purchase price presently expected to be between US$ 61 million and US$ 79 million (pre tax).
Samson’s Goshen County holdings were acquired several years ago reflecting the Company’s view that the Niobrara Formation represented an oil play that could be developed using horizontal drilling techniques. These techniques and the ability to sequentially fracture stimulate this type of rock in the Williston Basin have rapidly improved over the last two years. As a result of the industry’s recognition of the additional resources available by application of the improved technology, Samson expects to see a rapid development of the Niobrara Formation as these techniques are applied to this rock. There have already been some early successes by competitors which have confirmed this potential and raised the profile of the oil play.
As previously advised, Samson has been actively seeking an industry partner for the Goshen County Project. Samson’s Board of Directors recognized that full development of the Project would require more capital than was then available to the Company so that a partial sale of its holdings would be prudent to realize the maximum value from the Project. In order to establish the market value of this acreage, the Company invited industry participants to review the acreage and submit a sealed competitive bid. This competitive bid process helped Samson’s Board of Directors confirm the fairness of the price and other terms ultimately accepted.
The agreement calls for the sale of Samson’s entire working interest in the southern portion of the Company’s holdings in Goshen County, though Samson will retain an average 4.8% royalty interest in the leases that are sold. Samson will also retain all of its remaining interests located in the northern part of the existing Project, or approximately 16,300 net acres. Samson presently intends to drill and develop this retained acreage without further material dilution of its holdings, although future developments could alter those plans.