Spruce Ridge Resources Ltd. has an agreement to purchase certain mineral leases with petroleum and natural gas rights, plus oil and gas wells, pipelines and facilities in the Unity area of southwestern Saskatchewan from Repsol Canada Energy Partnership. Included in the purchase are 793 ha of petroleum and natural gas rights from surface to the base of the Mannville Group with an average working interest of 84%. The purchase includes 5 active oil wells, 10 suspended oil and gas wells, heavy oil facilities, pipelines, and an active produced water disposal well.
The purchase price is $50,000 cash, subject to adjustments as at the closing date and certain over riding royalties on production of petroleum substances. The purchase price takes into account the Company's responsibility for the Environmental Liabilities, including Environmental Defects and Abandonment and Reclamation Obligations.
John Ryan, the Company's CEO, stated "We are extremely pleased to have acquired this asset that will enable Spruce to generate cash flow almost immediately. The wells were shut-in during March and April 2020 during extremely low crude prices. The current crude prices will allow us to start producing from 5 to 7 oil wells with relatively low start-up costs. The acquisition includes a disposal well that will enable Spruce to reduce its operating costs and also potentially generate additional revenue from 3rd party produced water disposal arrangements".
Production on the acquired leases is mainly from the McLaren Formation in the Cretaceous Mannville Group at a depth of approximately 660 m. Net pay in the Salt Lake McLaren pool ranges from 2 to 4.5 m. The wells are mainly directional wells with cold, heavy oil (11-12 API) production. The McLaren pool is well-characterized from 3D seismic interpretations and the property has significant undeveloped resource potential with multiple new drilling locations.
Colin Bowdidge, Ph.D, P.Geo., Director and Officer is a "Qualified Person" under National Instrument 43-101 and the Vice President, Exploration of Spruce Ridge has reviewed and approved the technical contents of this press release.