PRNewswire-FirstCall/ -- Sun River Energy, Inc. (OTC Bulletin Board: SNRV). Sun River Energy, Inc. (the "Company" or "Sun River") announced today that it entered into a Farmout Agreement with Devon
Energy Production Company, L.P. ("Devon"), pursuant to which Devon has
granted the Company the right to drill on lands subject to oil, gas and
mineral leases owned by Devon. The Farmout Agreement covers 5,700 gross
acres (5,470 net acres) in the prolific Carthage Field located in Panola County, Texas.
The terms of the Farmout Agreement call for Sun River to drill a single vertical Test Well to the Haynesville Shale
geological formation on a proposed gas unit by gas unit basis. Sun
River will be required to drill a Test Well on a different proposed gas
unit, approximately every 90 days. Upon completion of each Test Well, Sun River
will earn between 75% and 77.5% working interest in all leases within
the gas unit being developed. There are no additional drilling
commitments once a Test Well has been drilled in a gas unit. Devon will
retain a carried working interest on the Test Well drilled in each gas
unit. Any additional wells drilled by Sun River
after a Test Well in a gas unit will require Devon to participate
within that gas unit on a "heads up" basis. The Farmout Agreement
required no up-front cash payment by Sun River.
Sun River's wholly owned operating company, Sun River Operating, Inc. (Texas) will be the operator on all wells under the Farmout Agreement.
The geographical area of the farmout is adjacent to and underlies portions of Lake Murvaul in East Texas.
In total there are approximately nine (9) potential gas units with over 89 potential drilling locations on the farmout acreage. The
primary geological targets, other than the Haynesville will be the
Cotton Valley, Travis Peak and Pettit
formations. Recently drilled vertical offsetting wells demonstrate
economic ultimate recoveries ("EUR") from 0.9 to 1.3 billion cubic feet
equivalent ("BCFE") of natural gas with some vertical wells in the area
projected to recover as high as 2.1 BCFE. There can be no assurances,
however, that the Company would achieve similar results.
Donal R. Schmidt, Jr., the Company's CEO and President, states:
"We believe the Devon Farmout provides the Company an exciting addition to our East Texas unconventional portfolio. Our senior management and staff have
significant experience in the Carthage Field dating back to 2000. This
farmout will allow us to grow our production and reserves in a very
familiar environment.
We also look forward to working with Devon as a non-operated mineral interest owner. We anticipate successful performance as an operator
under this Farmout Agreement will allow us to develop a long term
relationship with Devon that will lead to other opportunities of this
nature.
Based on current gas prices, one of our stated strategic corporate goals is to create a significant portfolio consisting of unconventional
natural gas assets in the East Texas
Basin. We believe, this farmout combined with the acquisition of the
acreage under our Purchase and Sale Agreement with Katy Resources ETX,
LLC, which was announced last week, is a big step in that direction.
Upon execution of the Farmout Agreement and assuming closing of the
acquisition from Katy Resources, we will have approximately 18,000 gross
acres in East Texas. We firmly believe that entry into the East Texas
market with gas prices at their current levels makes a lot of sense.
Combined with what we believe is very small overall entry costs for
these two deals, we are well positioned to quickly become a substantial
natural gas player in East Texas. We believe these opportunities allow us to balance our New Mexico assets in Colfax County with developmental type drilling here in Texas."
About Sun River Energy, Inc.:
Sun River Energy, Inc. is a development stage Dallas-based oil and gas exploration and production company. For further information on the Company, please visit our website www.SunRiverEnergy.com.
