Xstate Signs Agreement With Mosman For 2 Wells Drilling Program

  • May 08, 2019 AEST
  • Team Kalkine
Xstate Signs Agreement With Mosman For 2 Wells Drilling Program

An oil and gas exploration company, Xstate Resources Limited (ASX: XST) on May 8, 2019, announced that it has signed a Binding Farm In Agreement (Agreement), in order to acquire a working interest in the Champion Project Area onshore Newton County in Texas.

Under the Agreement with Mosman Oil & Gas Ltd, XST may earn a 25% working interest by funding a 33.33% interest in an onshore exploration project in Texas. The project includes a two well drilling program along with follow up opportunities. The estimated cost to the company is around US$0.4 million. The drilling of the initial well is expected to commence in the early Q3 period of FY2019, aiming 1.9 BCF of gross mean resource potential. The drilling of the second well is planned for the late 2019 period, aiming 357 MBO of gross mean resource potential.

Through this transaction, the company’s exploration portfolio gets diversification through the addition of “readymade” projects with imminent drilling and the potential for near-term oil production in the USA.

At this stage, the commitment of Xstate Resources towards drilling two wells in the Champion project signifies a wise and appropriately-sized acquisition for the company. Also, the location Texas signifies the strategic geographic shift for XST.

The investment options related to the drilling work would provide an excellent platform for growth. The cash flow from the drilling success will be used for further development, as well as appraisal activities. Further, the potential development of additional projects is under examination. The company feels that the location of the assets, adjacent to other oil discoveries might also provide opportunities for growth and aggregation.

Besides, through this transaction, the company would be able to develop on the ground operational capability, as well as gain access to commercially aligned operational relationships in Texas. Thus, it will enable the identification, evaluation along with potential purchase/farm in of additional production opportunities, in accordance with the investment strategy of the company.

The company is looking for further asset expansion opportunities in the USA, as well as Canada which is currently being assessed.

During the March 2019 quarter, the company remained focused on the business development activities along with the litigation actions in the Singapore region. Also, the company entered a strategic alliance with Hillcrest Petroleum limited and was able to identify a producing asset in Western Canada that Hillcrest has been pursuing on behalf of the partners. Besides, the company continued to actively seek to identify, as well as evaluate further asset opportunities that meet the investment criteria of the company and has the capability of being delivered on time.

The company used A$0.434 million in its operating activities. By the end of the March 2019 quarter, the company had net cash and cash equivalent worth $0.559 million. The total expected cash outflow in the second quarter of FY2019 will be around A$0.180 million.

By the end of the trading session on 8 May 2019, the shares closed flat at A$0.003. Xstate Resources Limited holds a market capitalization of A$3.42 million with circa 1.14 billion outstanding shares.


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