Blugrass Energy signs letters of intent to buy US assets

Blugrass Energy has signed letters of intent with multiple parties to buy oil and gas-producing properties in the Mississippian play in Oklahoma, US.

The company will acquire a 90% working interest in nine Mississippian wells on 1,680 gross acres in Osage County, with an average gross daily production of 52.6 barrels of oil and 548,900ft³ of gas for the three-month period ending 31 October 2011.

During this period, average net daily production was 35.5 barrels of oil and 370.500ft³ of natural gas.

The Osage County acquisitions include an associated field infrastructure of 14 storage tanks, ten separating units and three salt water disposal wells.

The assets include 20,000ft of unfracked horizontal well bore, offering potential upside based on a fracture stimulation programme the company has planned for next year.

In Woods County, Blugrass Energy will buy a 19.5% working interest in 4,000 gross acres, representing up to 25 potential drilling locations.

The company will acquire a 13.6% interest in a drilled Mississippian well bore awaiting completion, with first production expected next year.

The acquisitions in Woods County also include a 4.6% interest in one Hunton well bore, which is being recompleted as a vertical Mississippian well.

The upside of the acquisition also includes continuing development activities in the Woods County leasehold position, where up to five new wells will be drilled over the next 18 months.

Blugrass Energy will purchase the Oklahoma assets for a total of $10.25m, and the transaction will be closed with $1.50m cash, $1.65m in convertible notes and the balance in Bluegrass shares at $0.05 per share.