A unit of Kinder Morgan Energy Partners LP will buy carbon dioxide and helium holdings on the St. Johns dome in Arizona and New Mexico from Enhanced Oil Resources Inc., Houston, for $30 million.
The purchase includes all of Enhanced Oil’s rights, title, and interest in the St. Johns dome and certain related assets in Apache County, Ariz., and Catron County, NM.
On closing, targeted for Dec. 1, 2011, Kinder Morgan agreed to amend the CO2 gas sale and purchase agreement with Enhanced Oil, originally announced Apr. 20, 2010, modifying the dates of pipeline connection and the date of first deliveries and eliminating the termination fee. The companies anticipated a pipeline link to Permian basin oil fields.
Enhanced Oil said St. Johns “offered tremendous long-term potential for the right company, (but) the capital financing risks including our cost of capital and continuing associated carrying costs were considered to be too onerous on a company of our size.”
Proceeds from the sale will accelerate Enhanced Oil’s infill oil development on 27,000 acres in New Mexico and help finance its planned San Andres CO2 flood at 5,000-acre Milnesand field and potentially at the adjacent 20,000-acre Chaveroo field.
Enhanced Oil and predecessor Ridgeway Arizona Oil Corp. had been appraising the St. Johns CO2-helium producing properties since the early 1990s (OGJ, May 28, 2007, p. 41).