Sacgasco (ASX:SGC) has significantly strengthened its asset base in the Sacramento Basin, California, by acquiring 13 additional natural gas wells.
The new assets add significant value, with three wells now in production and the potential to bring more wells into production.
The agreement is being entered into with ABA Energy Corporation, a private Californian company.
The assets also include all associated leases, production and facilities, including meter stations and pipelines in three gas fields.
Sacgasco will have access to proprietary 3D seismic data over some 41 square kilometres, including significant mapped prospects for conventional natural gas.
As consideration, Sacgasco will assume future liabilities for plugging the wells acquired, and removing associated facilities, estimated to be US$20,000 to $60,000 per well.
A royalty not exceeding 3% on production from the existing and future wells in the lease area is to be paid.
There are a number of opportunities to bring other wells back into production through workovers and/or new pipeline connections.
This will add materially to Sacgasco’s current gas production from the Rancho Capay and Los Medanos Gas Fields.
The strong recovery of California gas prices in one of the lower operating cost environments in the world underpins Sacgasco’s pursuit of additional gas leases.
The company’s share price has increased by about 20% since the start of this year, last trading at A$0.078.