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Sun Resources Expands Lower Woodbine Acreage Near EOG Resources

Sun Resources (ASX:SUR) has secured rights to about 1,980 acres of oil and gas leases targeting the Lower Woodbine Formation in southern Leon County, Texas.

Notably, the new leases are adjacent to, and on trend with the expanding lease position of EOG Resources (NYSE:EOG), which has completed at least 7 horizontal Lower Woodbine oil producing wells in the immediate area.

These were completed in the last 12-24 and have delivered a range of 30-day initial production rates of between 200-500 barrels oil per day.

EOG - one of the most successful independent oil companies in the U.S. with a US$59.8 billion market cap - is also planning to drill a further four wells at its Grove location, which is 7.5 miles west of Sun's Jack Howe-1 well location.

Furthermore, some of EOG's new wells are very close to Sun's existing leases including the Zeus-1H well which has recently been completed. This is just 2.8 miles east of Jack Howe-1.

The new wholly-owned leases, which were secured at an attractive price of less than U$1,000 per net acre, are also adjacent to Sun's existing SW Leona and Normangee project areas and increase its total gross acreage position to almost 38,700 acres.

Their acquisition is consistent with its strategic objective to continue to grow its net acreage position in the oil-rich, Eaglebine unconventional oil play and the company will continue to consolidate its land position in the Lower Woodbine Formation.

Planning for the Jack Howe lateral continues, targeted for September 2014, subject to capital and rig availability.

New Leases

The new lease interest in the southern quadrant of its "Eaglebine" land are adjacent to and on trend with the rapidly developing Lower Woodbine Oil Play.

Each lease has rights to all depths and all formations, with an initial three-year term plus a two-year option.

A portion of the New Leases lie adjacent to Sun's interests in the SW Leona AMI (Sun 50%, Amerril Energy LLC 50%) to the East of the Normangee AMI and are subject to the AMI provisions of the SW Leona Joint Operating Agreement.

The primary target in these new leases will be the rapidly developing Lower Woodbine Formation, on the prolific Eagle Ford Shale oil fairway in East Texas, but other targets above and below also have potential for containing recoverable oil resources.

The acquisition was funded from existing cash reserves.

Analysis

In a strategic move, Sun Resources has secured rights to about 1,980 acres of oil and gas leases in Texas, which are adjacent to, and on trend with the expanding lease position of EOG Resources.

The new wholly-owned leases were secured at an attractive price of less than U$1,000 per net acre, and will be funded from existing cash reserves.

EOG is one of the most successful independent oil companies in the U.S. with a near US$60 billion market cap.

Highlighting the potential of the area, EOG has already completed at least 7 horizontal Lower Woodbine oil producing wells in the immediate area.

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