American Patriot Oil & Gas scores more Texan oil

American Patriot Oil & Gas ASX AOW more Texan oil

Oil and gas explorer and developer American Patriot Oil & Gas (ASX: AOW) today announced it has inked a letter of intent to acquire additional acreage in South Texas, United States.

According to the company, the new conventional oil and gas assets will increase its proven reserves to 2.3 million barrels of oil equivalent.

The deal was signed with Texas-based oil and gas company HJH Resources in a private off-market transaction worth US$1.2 million and has the potential to generate “over US$15 million revenue over a period of time”, American Patriot reported.

The acquisition comprises 38 producing wells on 43 leases, with a production rate of 40 barrels of oil and 374,000 cubic feet of gas (102 barrels of oil equivalent) per day, as well as significant upside potential. The leases have been certified by independent reserve reports to contain 430,000 barrels of oil equivalent proven oil and gas reserves.

American Patriot will operate the leases and said only minimal workover costs were required to significantly increase production in the field, since infrastructure and gas pipelines were already in place to deliver to nearby refineries.

American Patriot chief executive Alexis Clark believed the deal complemented the company’s aim to build a conventional oil business with production of over 1000 barrels of oil per day in 2018.

“This deal grows our business in South Texas with a significant reserve base with upside potential to grow the production and cash flow in line with an increasing oil price,” Clark said.

“We have completed our engineering analysis prior to finalising the LOI which gives us confidence to move to the next phase and we have valued the reserves at a conservative US$50 per barrel versus current market prices”.

The assets are being acquired using funds from the company’s recently announced US$40 million debt facility. The transaction is expected to close in mid-January and remains subject to further due diligence including land title and environmental work.

Asset build up

This latest deal is the fifth transaction American Patriot has completed in the second half of this year.

Earlier in November, the company achieved maiden production and first cash flow from its recently acquired oil assets in South Texas and Louisiana. It also signed a letter of intent to acquire acreage in East Texas for US$2.5 million.

As a result of these acquisitions, American Patriot now expects to achieve production of 500 bpd of oil equivalent by the end of the calendar year. Its target is to reach more than 2000 bpd of oil equivalent by the end of 2018.

According to the company, the combined assets will generate over US$80 million revenue at current oil and gas prices over a period of time.

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