Xtract Energy (LON:XTR) emerged among the leaders on the Alternative Investment Markets (AIM) today, rallying more than 23% in early trade on news its 50% associate Elko Energy set up a JV (joint venture) with oil major Chevron (NYSE:CVX) in an “excellent outcome” for its shareholders.
The agreement with Chevron covers Elko’s licenses in Blocks P1 and P2 offshore the Netherlands.
In return for its interests in the block, Elko will receive an overriding royalty up to 5% of the sales value from Chevron equity gas delivered into the Dutch National Transmission System and Chevron equity condensate delivered onshore.
On top of that, Chevron will pay Elko €4.3 million in cash for its share of past costs.
The first well on the acreage is expected to be drilled in 2011.
Elko said the deal is beneficial to its shareholders, who can now participate in the Dutch exploration and production business.
“We are delighted to conclude this deal and believe it offers an excellent outcome for Elko shareholders."
“We look forward to the results of the well planned for next year and to a successful ongoing business relationship with Chevron,” said Elko chief executive of Elko Peter Moir.
Elko simultaneously announced that hat the 02/05 license group, which comprises Norwegian Energy Company, Danish North Sea Fund and Elko, have submitted an application for an adjoining area immediately to the west of the 02/05 licensed area.
The application is made in the same working interest percentages as in the 02/05 license, namely operator Noreco 47%, DNSF 20%, Elko 33%.
Back in June, Elko released a resource update, which put its attributable prospective resource in Denmark stands at 3,557 billion cubic feet (bcf) of gas or 936 million barrels of oil (mbo).
On the Dutch acreage, the contingent resources for the 5 confirmed discoveries have been estimated at 280bcf of un-risked net attributable hydrocarbon gas, with a commercial chance of success ranging from 40% to 75%.
The prospective resources for the 6 key prospects in the exploration portfolio have been put at 291bcf un-risked net attributable hydrocarbon gas.