Doxa Energy Ltd. Provides Operational Updates
VANCOUVER, BRITISH COLUMBIA
- Doxa Energy Ltd. ("Doxa
" or the "Company
") is pleased to report that it has 9 wells in production or in the process of being placed in production. As of December 31, 2011 Doxa was receiving cash flow from 5 initial wells, and anticipates by May 1, 2012 it will be receiving cash flow from all 9 wells. The producing wells include 3 Eagle Ford Shale producers, 3 conventional Wilcox discoveries, and 3 completions within the Mississippian Oil Play of northern Oklahoma. At year end 2011 Doxa was receiving approximately $130,000 per month attributable to its interests in the initial 5 producing wells, net of production taxes.
PDC Rig 62 at Kynette Unit No. 1
Since its inception in May, 2010 Doxa has acquired approximately 4,000 acres of net leasehold. Overall, Doxa management expects to participate in a total of 18 gross wells this year. The plans include 2 wells within the Eagle Ford Shale Play of south Texas, 12 wells within the Mississippian Oil Play of northern Oklahoma, and 4 wells within the Sarco Creek 3-D Project on the Texas Gulf Coast. The following provides a more detailed update of some of Doxa's current projects.
Eagle Ford Shale Oil Play
As previously reported, 2 wells were completed and initiated production in 2010, being the Epley No. 1 and Peeler Ranch No. 1-H. These 2 wells are producing at a combined rate of approximately 85 barrels of oil equivalent per day (BOEPD). On July 27, 2011, drilling operations were commenced on the Peeler Ranch No. 2-H. The Peeler Ranch No. 2-H was completed and put on-line earlier this month and Doxa expects to release details of its initial production rates in the near future. As noted, offset operators have reported individual well EURs (Estimate Ultimate Recovery) in the range of 254-356 MBOE. This is in line with Doxa's expectations for wells drilled on the Peeler Ranch Prospect.
On February 2, 2012, the company entered into an arm's length third party agreement providing for divestiture of 11.3% out of its 20% interest in the Peeler Ranch No. 2-H in order to assist in financing further development of its retained interests. Doxa will retain an 8.7% working interest in the Peeler Ranch No. 2-H. Proceeds from this transaction total $900,000 which will be used to fund ongoing operations. The third party buyers will have an option to purchase similar interests in subsequent proposed wells under the terms of the agreement.
Mississippian Oil Play
As mentioned above Doxa has participated in 3 wells to date within the Mississippian Oil Play. These include the Panther-Cinder No. 2H-1 in Grant County, the SandRidge-Pendery Trust No. 1-5H and the Chesapeake-Ranita No. 1H, both of which are in Alfalfa County, Oklahoma. Doxa's working interest in these projects range from 1.67% to 2.5%. Though initial 30 day sustained production rates from these wells and projected EURs are not yet available, according to recent public disclosures by the leading operators in this play, single well EURs are projected at 400-500 MBOE with drilling and completion costs estimated at US$3.0mil per well. Doxa management will report results of these completions in the near future when this information is available. Based on 213 acre spacing per well, Doxa ultimately expects to participate in approximately 390 gross wells in this play, being 18 wells net to its interest. SandRidge Energy, Inc. has recently reported that on average it estimates over 90% rate of return, and expects to realize a net present value per well of approximately US$5.6mil (NPV10 based on 1/3/12 Nymex strip pricing). Subject to commercially viable results, Doxa management plans to participate in a total of 12 gross wells this year.
Sarco Creek 3-D Project
As previously reported, Doxa is participating in a proprietary 3-D seismic survey covering approximately 43 square miles in Goliad and Bee Counties, Texas. The company now reports that all Sarco Creek 3-D operations, as well as processing of field data by Geotrace Technologies of Houston has been completed. Geophysical evaluation and prospect generation is ongoing and the company plans to commence the drilling of initial exploratory wells this summer, and further expects to participate in a total of 4 wells on this project during 2012. All of the planned wells will be targeting Miocene and Frio formation reservoirs above 5,000'.
On February 1, 2012, Doxa entered into an Acquisition and Assumption Agreement ("Agreement") covering 10% out of its 30% interest in the Sarco Creek 3-D Project (the "Sale"). The Agreement between Doxa, Armada Energy Inc. ("Armada") and The Harvey Group, LLC ("Harvey") provides for total cash proceeds payable to Doxa of US$568,552, in exchange for an assignment of 10% (in equal 5% shares to Armada and Harvey), subject to a reversion of 25% of such interest in favor of Doxa upon the occurrence of payout. In addition, Doxa is afforded the opportunity to repurchase the subject interest for a period of 90 days by repayment of the original purchase price plus interest accrued at 10% per annum. As Armada and Harvey are owned and controlled by the Chairman (Arnold Armstrong) and President (John D. Harvison) of Doxa, respectively, the Sale is a 'related party transaction' within the meaning of Multilateral Instrument 61-101 (MI 61-101) (incorporated by reference into TSX-V policy 5-9). Doxa is relying on an exemption from the minority approval and formal valuation requirements of MI 61-101 due to the fact that the value of the portion of the property sold does not represent greater than 25% of the market capitalization of Doxa. The Sale is subject to the approval of the TSX-V and was approved by the independent members of the board of directors of Doxa.
During 2011, Doxa participated in 2 separate Wilcox discoveries, both located in southern McMullen County, Texas. The first of these, being the Martin-State Gas Unit No. 1 well was put on-line in June, 2011 and the Kynette Unit No. 1 well was put on-line in October, 2011. Together these wells are producing approximately 5,000 MCFD and 95 BCPD (barrels of condensate per day). Doxa owns a 14.0625% working interest in the Martin-State Gas Unit No. 1 well with a respective 10.4867% net revenue interest. As for the Kynette Unit No. 1 well, Doxa owns 16.70625% working interest BPO (12.5% net revenue) reverting to an estimated 12.5% working interest APO (est. 8.94% net revenue percent).
Unsecured Loan Agreements Amendments
On December 16, 2011, Doxa entered into amendments to the original loan agreements with Armada Investment Ltd. (controlled by Arnold Armstrong, Chairman) and Harvco, LLC (controlled by John. D. Harvison) extending the term of the loan agreements to August 15, 2013 from the original August 15, 2012. All other terms remained unchanged.
About Doxa Energy Ltd.
Doxa management is evaluating additional divestiture opportunities aimed at providing capital to fund its portion of the above described planned drilling and future development projects. Doxa Energy Ltd. develops and maintains a portfolio of producing and developing conventional and unconventional assets, including the Eagle Ford Shale Oil Play in South Texas, and the recently announced acreage acquisition in the Mississippian Oil Play of northern Oklahoma.
John D. Harvison
President, Chief Executive Officer
For further information contact:
Paul McKenzie, Director at 604.642.2625 or visit www.doxaenergy.com
Neither TSX Venture Exchange nor its Regulation Services providers (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Statements in this press release other than purely historical information, including statements relating to the Company's future plans, objectives or expected results, constitute forward-looking statements. Forward-looking statements are based on numerous assumptions and are subject to the risks and uncertainties inherent in the Company's business, including risks inherent in oil and gas exploration and development, and uncertainties in connection with anticipated commodity prices for oil and natural gas, growth of worldwide market demand, exploration capital requirements, length of asset life and availability of qualified personnel, among others As a result, actual results may vary materially from those described in the forward-looking statements.
All references in this press release to BOE are based on a 6 Mcf to 1 Bbl conversion ratio. BOE's may be misleading particularly if used in isolation. A BOE conversion of 6 Mcf to 1 Bbl is based on the energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This new release does not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company in the United States. The securities of Doxa have not been registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States or to or for the account or benefit of a U.S. person unless so registered or pursuant to an available exemption from the registration requirements of such Act or laws.