Merger involves Colorado’s third largest oil field

The acquisition of private Black Raven Energy Inc., Denver, by EnerJex Resources Inc. would create a combined entity that owns most of Colorado’s third largest oil field and substantial other interests in the Denver-Julesburg basin.

Aggregate consideration in the transaction is expected to be $45 million and the anticipated assumption by EnerJex of $15 million of additional long-term debt in order to discharge or acquire Black Raven’s existing debt.

Black Raven is majority owned by West Coast Opportunity Fund LLC, which owns about 16% of EnerJex. WCOF will own about 46% of the post-merger company on a diluted basis. Closing is expected by the end of the third quarter of 2013.

Black Raven has under lease more than 75,000 net acres in the DJ basin, including 45,000 net acres held by production. Black Raven’s assets are focused in two core projects described below, both of which are located on trend with emerging unconventional oil resource plays.

Black Raven owns a 100% working interest in 19,000 acres located in Morgan County, Colo., covering the vast majority of Adena field, which has been held by production since it was unitized by the Union Oil Co. of California in 1956. The Colorado Oil and Gas Conservation Commission ranks Adena as the third largest oil field in the history of Colorado behind Rangely and Wattenberg, having produced 75 million bbl of oil and 125 bcf of natural gas.

Nearly all Adena field producing wells were temporarily abandoned or shut-in during the secondary recovery phase in the mid-1980s when oil prices collapsed, and only a small number of wells have been produced since that time.

Black Raven produces 250 gross b/d of oil and gas equivalent, 68% oil, from eight J sand wells and seven D sand wells in Adena at 5,500 ft. Another 135 wells are shut-in or temporarily abandoned, of which Black Raven has initially identified 80 to be re-activated in the J sand or recompleted in the D sand.

Black Raven’s producing J sand wells average more than 10 b/d of oil, and its most recent D sand recompletion achieved an initial peak rate of 100 b/d before stabilizing at 30 b/d. In addition, Black Raven initiated a waterflood in an isolated D sand oil pool in the first quarter of 2013.

Black Raven also owns leases covering more than 55,000 net acres in Phillips and Sedgwick counties, Colo., and Perkins County, Neb., of which 25,000 acres are held by production and more than 15,000 acres expire after 2015. Black Raven produces 250 Mcfd of gas from the Niobrara formation in this project, the majority of which is attributable to a 6% overriding royalty interest that it owns in 200 wells that were drilled during the past few years by a large independent oil and gas company.

Black Raven’s Niobrara acreage was highgraded based on structural features identified through analysis of 114 miles of 2D and 165 sq miles of 3D seismic data on its original position of 330,000 net acres. The company has identified more than 150 high-ranked Niobrara drilling locations on its existing acreage based on 3D seismic analysis that has historically yielded success rates of 90% in this play.

Black Raven’s acreage is well situated with direct access to the Cheyenne Hub market and immediate proximity to the 1,679-mile Rocky Mountain Express pipeline and the 436-mile Trailblazer pipeline.

EnerJex’s assets are in eastern Kansas and South Texas.

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