PROPERTY ACQUISTION / Cotton Valley Completes Zama Field
Acquisition; Subsequently Sells Zama for Cash and Contract to
Purchase Significant Oklahoma Producing Property
CANADIAN DEALING NETWORK SYMBOL: CVZC
AMEX SYMBOL: KTN
JANUARY 20, 1998
Cotton Valley Completes Zama Field Acquisition; Subsequently Sells
Zama for Cash and Contract to Purchase Significant Oklahoma
Producing Property
DALLAS, TEXAS--Cotton Valley Resources Corporation today announced
that it completed its previously announced acquisition of oil and
gas interests in the Zama Lake area in Alberta, Canada from
Paramount Resources, Ltd.
Following the closing of this transaction, Cotton Valley exchanged
this property with Phillips Petroleum Company of Bartlesville,
Okla., for cash and a contract to purchase an interest in the East
Binger Unit, a significant producing oil and gas property in Caddo
County, Okla.
"This transaction benefits Cotton Valley in a number of ways,"
stated Gene Soltero, chairman and chief executive officer of
Cotton Valley. "First, we obtained immediate cash, and if the
purchase of the Oklahoma property is completed, we will be
securing a steady stream of future production cash flow. The
Oklahoma property also contains significantly longer life reserves
than those at Zama Field, better complementing those already owned
by Cotton Valley. Third, the new property is beneficially located
in Oklahoma, allowing Cotton Valley to better utilize the
knowledge, expertise, equipment and personnel already assembled
for our Texas and Oklahoma properties, which we expect will result
in greater efficiency and recoverability. Furthermore, this
transaction is anticipated to result in higher earnings for fiscal
1998 than would have been reportable had we retained the Zama
property."
Cotton Valley received cash from Phillips and the right to
purchase for $4 million all of Phillips' interest in the 80-well
enhanced oil recovery project at the East Binger Unit. Cotton
Valley engineers have estimated that the reserves at East Binger
range from 1.0 million barrels oil equivalent ("BOE") of light
sweet crude oil, natural gas and natural gas liquids to a maximum
of 2.5 million BOE. The present value of future net revenues
(discounted at 10 percent) could range net from $4 million to $10
million, depending upon production decline rates, future
percentage recovery rates and oil prices. There is general
agreement that there were originally 90-100 million barrels of oil
in place at East Binger, of which approximately 16 percent have
been produced. A $200,000 three-dimensional reservoir similation
study is scheduled to be completed during 1998 which will be used
to more closely estimate the remaining reserves and the procedures
to be used to optimize production rates over the next 10 to 20
years.
The East Binger Unit is the first commercially successful
application of nitrogen injection pressure maintenance for
enhanced oil recovery and has been operating since the early
1980's. With 56 producing wells and 25 injection wells, a
cryogenic air separation plant and 20 million cubic feet per day
compression capacity, the East Binger Unit currently produces
approximately 2,000 BOE daily. The Cotton Valley interest will be
approximately 23.4 percent in the 13,000 acre unit and nitrogen
plant. Cotton Valley will also obtain all of Phillips' interest
in the other shallower zones in the approximately 3,000 net acres
of oil and gas leases contributed by Phillips to the East Binger
Unit.
Continued Soltero, "We now have more than $3 million in cash
available to accelerate the development of our oil properties in
West Texas. This new property would also provide us with access
to additional demonstrated and successful enhanced recovery
technology. We see this transaction bringing Cotton Valley into
the forefront of oil and gas industry standards, increasing our
stature and enhancing relationships, both in the energy sector and
the financial community."
Cotton Valley is a fast growing, independent oil and gas company
with producing property interests in the states of Texas and
Oklahoma. Cotton Valley also purchases and resells oilfield
equipment and provides horizontal drilling services through its
Mustang subsidiaries. There are approximately 17 million common
shares outstanding. |
