American Patriot to acquire oil assets in Utah and Texas by December 2016
Published on: | by finfeed
American Patriot (ASX:AOW) is fast tracking the acquisition of the Westworld oil assets by splitting the transaction into a two phase process, of which the first phase is set for completion next month.
The decision was made primarily due to the complexities involved with the overall transaction of the Westworld assets located in Utah and Texas, including the pipeline and gas plant.
Phase one of the transaction sees AOW acquire producing assets in Utah and Texas with 40bopd production and 2.1mbbl proven oil reserves with significant shut-in production of over 300bopd.
Due diligence on this initial transaction is well underway with the AOW team having carried out a recent site visit that included technical due diligence involving an independent confirmation of the reserves and legal documentation of the transaction.
Phase one assets:
This includes over 13 well bores and 40bopd of existing conventional production with the potential to grow production to over 300bopd by mid-2017, with low capex spending required to restart shut in production.
The production life of the wells is expected to last 15 to 20 years per well.
Although it should be noted that this is still in early stages and investors looking to add this stock to their portfolio should seek professional financial advice for further information.
Phase two involves the acquisition of the gas plant and pipeline by AOW, which is anticipated to be completed in the first half of 2017 subject to due diligence.
Technical personnel have been deployed to assess the performance of the assets, including the care and maintenance of the plant, conducting extensive environmental due diligence and completion of any necessary government and environmental approvals required for the transfer of the asset.
This due diligence carried out by AOW is to ensure that there are no liabilities attached to the soon to be acquired asset.
Assets acquired through phase one will be financed through the issuance of 19M shares to the selling entities, with the stock issued to be escrowed for 12 months. As a result of the transaction the selling entity will hold an approximate 9.2% holding in AOW post completion.
This transaction is expected to close in the coming weeks, with phase one of the deal not requiring shareholder approval.
A performance bonus of 20 million shares will be issued to the vendors if staged tranches should the assets contribute in growing production to a target of 200bopd. This stock, should it manifest, will also be held in escrow for 12 months.
Further to the news surrounding the soon to be acquired assets in Utah and Texas, AOW has begun the process to list on the US OTC market. The listing is expected to materialise early 2017.