Golden Gate Petroleum (ASX: GGP) has reached agreements for A$7.5 million in funding from a U.S. asset management firm for continued development of its Permian Project in Reagan and Irion Counties, Texas.
This development work, which will also be funded by the recent Entitlement Offering, is expected to generate enough cash flow for the company to keep all its booked proved and probable gas reserves in the project.
It will allow Golden Gate to start drilling up the reserves and maintain the lease where those reserves are located.
The Permian Project has proved and probable reserves of 5 million barrels of oil equivalent.
The company is extending its Permian Project leases, which expire at the end of this month, under the lease agreements.
It plans to execute a monthly extension for up to four months while its work and fund raising for a scaled up drilling program continues.
The Company is currently in detailed discussions with several financiers and potential farm-in partners involving the continued development of the Permian Project.
The non-binding funding term sheet covers $7 million in equity based funding as well as the issue of $0.5 million in convertible notes on execution of the term sheet.
Execution would immediately provide a total of $0.6 million plus an anticipated $100,000 to
$300,000 of equity based funding in each subsequent month over the two year term of the facility.
Proceeds from the funding will be used specifically for the fracture stimulation of its first Permian Project horizontal well SRH-5H, the frac completions in the Spraberry Dean intervals for the SRH-1 and SRH-2 wells along with preparation work for the next round of drilling.
Fracture stimulation of SRH-5H will be carried out in the Upper Wolfcamp interval, which is referred to as the A Bench.
Based on other horizontal well estimates by major operators in the area, the SRH-5H well could have estimated ultimate resource potential of about 400,000 barrels of oil equivalent (boe) made up primarily of oil and gas liquids.
Golden Gate is also preparing to set capillaries on both the SRH-1 and SRH-2 wells so the isolated
Cline interval can be put on production and comingled with the Wolfcamp intervals which have already been fracced.
The addition of chemicals to the bottom hole Cline interval is designed to avoid paraffin falling out of the oil while being produced.
Preparations are also underway for drilling of the SRH-6H well, which has been surveyed and is now going thru the approval process with the mineral holder before going to the Texas Railroad Commission.
The SRH-7 and SRH-8 wells are also being surveyed and drilling permit applications prepared for filing.
The onshore Permian Basin has a long history of oil exploration and development and has received renewed interest from both capital providers and industry participants.
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