Development Agreement for Permian Basin Acreage Would Eliminate Capex Budget
Source: Streetwise Reports
November 29, 2017 (Investorideas.com Newswire) The letter of intent signed to develop this oil & gas company's large acreage in the red-hot Permian Basin would not only eliminate the company's capex budget, it could give the company a long-term cash flow stream.
Amazing Energy Oil & Gas Co. (AMAZ:OTCQX) holds rights to 70,000 contiguous acres in the prolific Permian Basin. Today it announced that it has entered into an agreement with JH Fossil Energy, LLC to "develop Amazing's current holdings in Pecos County Texas, as well as to be acquired assets located elsewhere in Texas."
The agreements will allow JH Energy an opportunity "to acquire a 50% interest in the rights to approximately 70,000 continuous acres in Pecos County, TX exploiting the Yates, Seven Rivers, Grayburg, Queen, San Andres, Wolfcamp, Woodford, Devonian & Ellenburger pay zones and 6,600 acres located elsewhere in Texas that Amazing is currently in the process of acquiring."
The LOI calls for the parties "to negotiate and execute definitive agreements with provisions totaling $39.175 million in consideration flowing to Amazing, including a $17.5 million capital carry for Amazing for its Pecos County acreage; $5 million for seismic, science and deep formation testing; and a $3 million capital carry for Amazing for an additional project."
The agreement will also include a commitment for JH Energy to use Amazing's drill rigs and equipment for the drilling of the Queen pay zone, and JH Energy will prepay Amazing $5 million "to secure use of the rigs. After such prepayment is expended, Amazing will be entitled to a fixed rate payment for the Rigs going forward, thus providing Amazing a long-term cash flow stream."
"We are pleased to enter into this LOI with JH Energy; a partner with an exceptional reputation of operating assets to maximize profitability," stated Will McAndrew, CEO of Amazing Energy. "The capital commitment from JH Energy will allow us to de-risk the substantial asset while maintaining the upside potential of future development."
McAndrew told Streetwise Reports that he is especially pleased that the agreement will provide $5 million for scientific testing. "Our 70,000-acre land package is a massive area where thousands of wells could be drilled and produced. The better we understand the geology, the greater the likelihood of success."
"This agreement will also eliminate the need for Amazing to have a capex budget for the development of the property," McAndrew stated. "There are three very important aspects to Amazing's opportunity: buy it right, get carried in the development and do the science (homework)!"
Technical analyst Clive Maund of CliveMaund.com, wrote on Nov. 26 that "the company has acquired a large block of land in the Permian Basin in Texas at an extremely cheap price, which is adjacent to the prolific Yates Oilfield, and therefore very likely to contain a lot of oil and / or gas, and is embarking on an aggressive drilling program at a time when the oil price is advancing after being depressed for some years, and more than 90% of its stock appears to be tightly held by insiders, so the float is very low. It is therefore logical to suppose that any speculation regarding positive drilling results could cause a significant runup in the stock price."
Amazing Energy, Maund concluded, "remains an attractive speculative play with big upside potential."
On Nov. 21, Streetwise Reports published an article on Amazing that discussed fundamentals of the company.
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