Nighthawk Energy (LON:HAWK, OTC:NHEGY) has revealed that it has now signed seven confidentiality agreements with prospective partners, consisting of significant US and international firms, regarding the Jolly Ranch oil shale project in Colorado.
The company and its privately-held development partner and operator Running Foxes Petroleum, intend to sell 75% of Jolly Ranch and are also offering the operatorship to the prospective buyers. Nighthawk has now agreed to extend the timetable for the planned divestment, due to the continuing interest in Jolly Ranch, so that “as many companies as possible” can evaluate the project.
In June, the Jolly Ranch partners hired Macquarie Tristone to carry-out the marketing programme. Between them, Nighthawk and Running Foxes intend to sell equal stakes in the project.
Macquarie has prepared and issued an Overview Memorandum setting out details of the Jolly Ranch Group assets. Nighthawk noted that Macquarie’s engagement is open-ended and as previously stated the dates referred to in the Overview Memorandum are non-binding and subject to change.
The company also highlighted that well-completion activity and data evaluation is continuing on Jolly Ranch, and a new drilling programme is planned in parallel with the divestment process. Furthermore, revenues at from the project are at an all-time high and they continue to increase.
Whilst acknowledging that “there can be no assurance that the [marketing] process will result in the completion of a transaction”, the company said that the initial indications of interest from the group of industry participants are clearly encouraging,
Jolly Ranch covers 406,400 acres in the Denver Basin and the project is currently at a mature stage of development - having progressed through seismic acquisition, drilling, well completion, testing and geochemical and fluid analysis.
According to a report carried out by Schlumberger, a major oil and gas consultancy, Jolly Ranch most likely contains some 1.5 billion barrels of oil-in-place. Currently, an extensive drilling and testing programme has been taking place at Jolly Ranch, and Schlumberger is currently conducting a second report which will be used as the basis of an independent reserves assessment.
A scoping study undertaken by Macquarie estimated the project’s NPV (net present value) at US$2.8bn, based on a 75% working interest and recoverable reserves of 215.5mmboe (million barrels of oil equivalent).
However, Nighthawk believes the project could be more valuable as the partner have yet to undertake significant development and appraisal work to define a reserve base.
Earlier this month, another Schlumberger report provided confidence that oil shales were present under most, if not all of the Jolly Ranch project acreage.
The report was commissioned to confirm independently that the organic rich shales in the Atoka and Cherokee are laterally continuous, specifically between the Craig 6-4 SWD well and the recently drilled John Craig 7-2 well which are approximately 30 miles apart.
It was concluded that in both the Atoka and Cherokee formations, the individual shales can be readily correlated through the area covered by the cross sections and that shales were present under most and probably all of the acreage.