The AIM-quoted natural resources group said it wants to acquire a 75% non-operated working interest in an oil well in Wyoming, via an auction process under a Chapter 7 bankruptcy proceeding.
It is a recently drilled well, Regency highlighted, adding that it was logged (at a cost of US$4mln) but due to the past owners financial difficulties not perforated.
The well’s operator has calculated some 470,000 barrels of potentially recoverable oil is ‘behind the pipe’, Regency said. The oil is hosted in stacked pay zones, and the two deepest (which would be completed first) are believed to have some 150,000 barrels.
Across the entire acreage position the operator has estimated some 29mln barrels of potentially recoverable resources.
If Regency and its US partner can successfully acquire the well via auction, they would also have the right to earn more than 9,000 acres of oil and gas leasehold interests surrounding the well. Interest in the larger project would be earned through the completion of additional productive wells.
Andrew Bell, Regency chairman, said: "While we can provide no assurance that we will be the successful bidder at the bankruptcy sale, this is an opportunity for Regency to acquire a sizeable and good class of oil and gas asset in an established oil producing region for cents on the dollar.”
“We feel that this opportunity is an important one for Regency's future and we intend to concentrate significant managerial and financial resources on this bidding process.”
“The board feels that establishing a foothold in low cost, onshore US oil and gas development while the sector is depressed is the optimal strategy in current conditions and offers outsized potential returns to shareholders.”
Bell added that Regency is also looking at other opportunities to acquire onshore oil and gas assets coming out of bankruptcy and insolvency situations.
“Although we cannot expect to succeed in consummating a transaction in every case, we believe we can succeed in some, and even one might be transformative for Regency,” he said.
The partnership would see Regency ‘carry’ the costs for the US oil firm, which would have a 25% stake, for the completion of the already drilled well, and two further wells in the broader project.
Regency says it is currently budgeting US$1mln for the acquisition process, and a US$100,000 prospect fee is earmarked for the US partner should a deal proceed.
Additional partners would be sought if the costs of the project materially exceed US$1mln, Regency added.