U.S. Energy has announced it has entered into an acquisition, exploration and development agreement with a private party in an oil and gas prospect located in Southeast Colorado.
Under the terms of the agreement, the Company acquired an 80% working interest in approximately 3,000 net acres. The Company has also agreed to carry the seller for their 20% working interest to casing point in the initial well. The dry hole cost of the well is estimated to be $250,000.
USE will be the operator of the project and the initial well is planned to be spud in the second quarter of 2011. All subsequent wells will be drilled on a heads up basis. The prospect is a Mississippian target with an expected total drilling depth of approximately 6,500 feet.
The prospect has geophysical features similar to the nearby Brandon Field which has produced in excess of 11 million barrels of oil from the Mississippian formation and had average EURs of ~250,000 BOE per well.
The Brandon field was drilled on 40 acre spacing. Geologic evaluation and current spacing suggest potential for ~40 gross well locations, based on drilling success.
"We are pleased to announce a new joint venture where the Company will operate in an area with considerable resource potential based on our preliminary geologic and 2D seismic analysis," said Keith Larsen, CEO of U.S. Energy Corp.
"We are now actively staffing up to transition into operations on our own behalf as well as increase our conventional and non-conventional prospect leasing activities," he added.
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