By OGJ editors
HOUSTON, July 18 -- Magellan Petroleum Corp., Portland, Me., has signed a letter of intent with Vaalco Energy Inc., Houston, to begin developing the Bakken formation and deeper horizons in the East Poplar Unit and Northwest Poplar field in Roosevelt County, Mont.
The LOI terms remain subject to closing on a definitive agreement. The LOI contemplates a farm-out to Vaalco of an operating working interest in 23,000 net acres of oil, gas, and mineral leases covering the Bakken and deeper formations at Poplar.
Vaalco has agreed to acquire 65% in return for cash consideration and for bearing 100% of the cost to drill three wells by the end of 2012. The parties would then move forward together as 65%-35% owners, respectively, to further develop the prospects.
Magellan will retain its current ownership for all formations above the Bakken, including the currently producing Charles and Tyler formations, where all Poplar proved and probable reserves are located.
Magellan said the partnership with Vaalco is another step, with a strong and experienced partner, toward monetizing the asset not only from the Bakken but also from the Three Forks, Red River, and associated deeper formations.