MegaWest Energy to acquire land in Montana

Oct. 26, 2007
MegaWest Energy USA, an independent focused on heavy oil, has acquired an interest in over 33,000 acres of land in Montana from a group of three private companies.

By OGJ editors
HOUSTON, Oct. 26 -- MegaWest Energy USA Corp., an independent oil and gas company focused on heavy oil, has acquired an interest in over 33,000 acres of land in Montana from a group of three private companies.

MegaWest Energy USA's Calgary parent company, MegaWest Energy Corp., continues its strategy of acquiring blocks of oil and gas rights in the US that are expected to contain heavy oil. The latest transaction closed Oct. 24.

The deal's total value, including the future use of warrants, is an estimated $2.25 million, MegaWest Pres. and Chief Executive Officer George T. Stapleton told OGJ. He said MegaWest can acquire heavy oil assets cheaper in the US than in Canada.

The company owns or has the right to earn an interest in over 100,000 acres in Texas, Kentucky, Missouri, Kansas, and Montana. It plans delineation drilling and pilot production tests using thermal recovery technologies developed in Canada.

MegaWest produces 100-150 b/d of heavy oil now through the Chetopa pilot project in Kansas.

Montana deal
Terms of the Montana Big Sky acquisition involve $300,000, 500,000 shares of MegaWest, and 250,000 warrants. Each warrant entitles the holder to buy a share of MegaWest for $2.50/share for 18 months.

The acquisition includes 40% working interest in the Teton River prospect in Choteau County, Mont. MegaWest plans to earn another 20% working interest by carrying the private companies through the first $2 million of work.

MegaWest also acquired 40% working interest in the Loma prospect in Choteau County. The company will earn another 20% working interest by carrying the private companies through the first $1 million of work.

Stapleton said MegaWest and the private companies established a regional area of mutual interest covering 1 million acres that will remain active for 2 years. The interest in that area is divided 65% to MegaWest and 35% to the private companies.

MegaWest agreed to pay for 100% of the lease acquisition, initial geological and geophysical activity, drilling, and completions.