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Art's new company Velo Energy to acquire interest in Central North Sea 2009-10-07 17:05 MT - News Release Mr. Arthur Millholland reports VELO ENERGY ENTERS INTO AGREEMENTS FOR UK NORTH SEA PROPERTIES Velo Energy Inc.'s board of directors has approved two acquisitions that will give the company the following interests in the U.K. Central North Sea: A 100-per-cent equity interest in block 16/26p known as "Caledonia"; A 65-per-cent equity interest in block 21/23a known as "Sheryl"; A 50-per-cent equity interest in blocks 28/9 and 28/10c known as "Catcher"; A 65.17-per-cent equity interest in block 22/15, which includes the Banks discovery. Velo's entrance into the North Sea was made possible by the acquisition of North Sea Oil Ltd., a Canadian-based private company, and North Sea Oil Exploration Ltd. (NSOEL), a U.K.-based private company. NSOEL recently entered into a sale and purchase agreement (SPA) with an arm's-length third party vendor for the Caledonia, Sheryl and Catcher properties, and a letter of intent (LOI) with a different arm's-length third party vendor for the Banks property. Management of the company has direct experience with the Sheryl and Catcher properties as these were assets of Oilexco Inc.'s wholly owned subsidiary prior to its bankruptcy. A number of Velo's current senior management had previously been employed as senior management at Oilexco. Arthur Millholland, president and chief executive officer of Velo, commented, "These acquisitions give Velo a core group of near- and mid-term development properties upon which we can build a growing North Sea oil company." Under the terms of the SPA, the company will make an initial payment of $12-million (U.S.), an additional payment of $8-million (U.S.) after gross production of one million barrels at Caledonia, and a final payment of $5-million (U.S.) after gross production of three million barrels at Caledonia. Caledonia previously produced 6.02 million barrels of oil from a single well until production was shut in. In a report dated Sept. 15, 2009, with an effective date of July 31, 2009, Sproule International Ltd., independent reserves evaluators, estimated proved and probable reserves in the Caledonia field at 3.68 million barrels of oil and probable reserves of 2.1 million barrels of oil in the Sheryl oil pool (adjusted for a 65-per-cent equity interest). Both Caledonia and Sheryl are in the vicinity of third party-operated production facilities. Catcher is an exploration property. The Banks discovery well (22/15-3) encountered porous, deep water turbidite sandstones in the Paleocene Forties formation that were hydrocarbon bearing in a four-way closed structure, and encountered a gross hydrocarbon height of 85 feet in the Forties. The hydrocarbon column had a gas cap of about 20 feet (GOC at 8,698 feet) overlying a 50-foot oil column of 35-degree API. The acquisitions of North Sea Oil and NSOEL by Velo are related-party transactions within the rules of the TSX Venture Exchange, as Velo's entire senior management team was either registered or beneficial shareholders of North Sea Oil and NSOEL. Mr. Millholland and a director of Velo did not vote on the resolution approving the transaction. The transaction is subject to regulatory approval. Velo will issue one million common shares to the owners of North Sea Oil and NSOEL as payment for the acquisitions which will then result in a total of 66,608,888 common shares issued and outstanding. Both private companies will be wholly owned subsidiaries of Velo. Both the SPA and the LOI are subject to financing and regulatory approvals in Canada and the United Kingdom. We seek Safe Harbor. | ||||||||||||||
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