Terrace Energy Corp., Vancouver, BC, has reached agreement with an undisclosed party to earn more acreage in McMullen County, Tex., on trend with the STS Olmos project in which Terrace participates with BlackBrush Oil & Gas.
Terrace will acquire a 33.34% working interest, 24% net revenue interest in 3,616 net mineral acres upon satisfying the agreement’s earning provisions, which would raise its net mineral acreage position to 6,310 acres.
Terrace will acquire 33.34% working interest in an initial 199.05 net mineral acres in exchange for $33,173 and funding its proportionate share, estimated at $1.8 million, of an initial horizontal well into the Olmos formation.
Upon successful completion of the initial well, Terrace will have 90 days in which to exercise its option to acquire at least 33.34% working interest in an additional 3,416.95 net mineral acres for $700,000. The company believes that acreage will support 10-20 Olmos wells beyond the initial well.
The most recent four of the eight wells BlackBrush and Terrace have drilled generated 30-day initial potential rates averaging nearly 600 b/d, are flowing at a combined rate above 3,000 b/d of oil equivalent, and have recovered more than 100,000 bbl of oil (OGJ Online, Oct. 2, 2013). About 160 gross additional locations have been identified.
In preparation for moving from the delineation to the development phase in early 2014, the partners have agreed to rationalize leasehold interests throughout the existing project area to effect an overall 33% working interest in favor of Terrace, proportionately reduced by third party interests in a portion of the project area.
In total, Terrace owns a 30% working interest in the current project acreage. As the project expands, Terrace and its partner will participate in new acreage at 50% working interest each, adjusted for third party interests.