Zodiac eyes Kreyenhagen drilling on Aera farmout

Aera Energy LLC has advised Zodiac Exploration Inc., Calgary, that Aera plans to spud the first well on the northern part of the Mortgage block in Kings County, Calif., about Feb. 4.

Under terms of the farmout from Zodiac, Aera acquired the right to earn up to 50% of Zodiac’s interest in 19,600 acres of the Mortgage block by drilling two vertical and two horizontal earning wells on or adjacent to the farmout lands in two earning phases. Each phase comprises one vertical and one horizontal well.

Upon fulfillment of the drilling commitment under each phase, Aera will earn a 50% interest in 9,800 acres of each phase, respectively.

The first well, Aera Mortgage 881D-15, is to reach a final vertical depth of 15,000 ft in order to penetrate and evaluate the thick, regional Monterey and Kreyenhagen formations. Both formations have demonstrated the potential in previous nearby wells to contain large accumulations of oil in these established source rocks. Mortgage 881D-15 is an 80-day well.

After well data are evaluated, a horizontal well is planned to be drilled, either as a sidetrack out of the existing vertical wellbore or as a standalone well through the respective zone of interest. The drilling of a sidetrack is expected to take up to 45 more days, Zodiac said.

Aera will cover 100% of all costs, including all costs through to production in the event the well is successful. Zodiac will retain a carried 12.5% working interest before payout and 25% after payout in the earning wells.

The phase two earning wells are expected to spud by Dec. 1, 2013. Upon Aera’s fulfillment of its earning obligations under each earning phase of the farmout, Zodiac will elect either a 50% working interest or a 3% overriding royalty in the farmout lands earned by Aera in each phase.

Peter Haverson, Zodiac president and chief executive officers, said internal detailed geologic mapping indicates the Kreyenhagen to be prospective covering an area of Zodiac’s lands of around 57,000 net acres.

Zodiac management’s gross unrisked best estimate for this entire Kreyenhagen formation, derived from all available petrophyiscal logs, core data, and an average gross formation thickness of 800 ft, amounts to 43 million bbl/sq mile of prospective resource or a total of 3.87 billion bbl of prospective resources for the net acreage.

The Aera-operated drilling program will go far towards establishing not only the potential of the Mortgage block but also Zodiac’s adjacent 66,000 acres in the San Joaquin basin.

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