NEWS
Jan 18, 2008
EERG Increases Interest in West Ranch Oil Reservoir and Initiates New Natural Gas Deal
LITTLETON, Colo., Jan. 18 /PRNewswire-FirstCall/ -- Eternal Energy Corp. announced today that it has acquired an additional 25% working interest in the SW extension of the main body of the West Ranch Field in Jackson County, Texas. This raises EERG's total working interest in this property to 75%. The EERG acreage is believed to have reservoirs similar to those in the main body of the West Ranch Field, which is a well-known, long-standing producing field. EERG paid for this additional working interest by issuing two million shares of its common stock. EERG's valuation of these additional oil and gas reserves, based on a Ryder-Scott engineering report, substantially exceeds the value of the issued stock at its current market price.
In early 2006 Ryder-Scott Co., a Houston-based petroleum engineering consulting firm, analyzed the potential for waterflooding of the Glasscock reservoir underlying the EERG acreage. Based upon their review, Ryder-Scott attributes 900,000 barrels of proven undeveloped reserves in the Glasscock reservoir -- 675,000 barrels net to EERG's 75% interest. The incremental contribution of the recent purchase amounts to 225,000 barrels of oil net to EERG.
Eternal Energy Corp. and its West Ranch operator, PNP Petroleum of San Antonio, a privately owned oil and gas company, have begun the initial well work to implement a pilot waterflood program of the Glasscock reservoir. The initial well work commenced in early December 2007 and, by the end of January 2008, two injectors at/near the original oil/water contact and two producers updip of the these injectors are expected to become operational.
If this pilot project is successful, EERG plans to implement a full-scale waterflood program of the Glasscock reservoir by the end of 2008. This could mean that up to 15 injectors and 15 producers could be working simultaneously on the property. According to a third-party engineering study, performed by Bommer Engineering of San Antonio, Texas, the interest of EERG in this property has the potential, at current commodity prices, to generate up to approximately $650,000 to $750,000 per month of cash flow during the estimated 18-month peak production period of a successful waterflood project. EERG's total oil production program for the Glasscock reservoir could span 10-years.
EERG also announced today that it has acquired, subject to execution of formal contracts, the right to pursue a down-hole gas/water separation (DGWS) opportunity, primarily in Western Canada in conjunction with Heritage Natural Gas Company (HNG). HNG controls exclusive contracts and know-how for the DGWS technology. If the transaction is completed, EERG will own exclusive access to a proprietary and patented down-hole gas/water separation and re-injection process that has the potential to extract significant stranded gas reserves in the Western Sedimentary Basin. EERG's current analysis indicates the potential for application of this process is hundreds of shallow gas wells that have been abandoned due to water production problems but may still have economically viable stranded reserves.
In connection with the DGWS opportunity, EERG also announced that it has paid $125,000 to Westport Petroleum Company for an assignment of all of Westport's rights in six non-producing properties in Alberta that may be potential candidates for the installation of the DGWS technology.
To confirm the economic viability of the DGWS technology for natural gas production, EERG, through its newly formed, wholly owned Canadian subsidiary, EERG Energy ULC, has committed to drill two gas wells in conjunction with HNG in 2008 or 2009. EERG has agreed to pay to HNG $250,000 (in cash or in shares of EERG's common stock) on December 31, 2008 and on December 31, 2009, to guarantee EERG exclusive access and supply of needed tools for HNG's proprietary down-hole gas/water separation and re-injection process for the two gas wells. EERG has also obtained the contractual right to drill an additional eight wells with HNG prior to December 31, 2010.
EERG believes that the economic potential of the HNG transaction may be material for its stockholders. EERG assumes that at a drilling and completion cost of $525,000 per well, coupled with average production volumes of 375 mcfpd (thousand cubic feet per day) an annual return of $574,000 per well would result. The company would expect that payout would occur in less than one year and the production life of these wells could run for up to 9 years.
EERG has been granted the exclusive option to acquire all of HNG's issued and outstanding stock, as well as sole ownership of HNG materials, contracts, and licensing agreements. The option expires on December 31, 2010, and is exercisable at any time during its term, but can be terminated by EERG only after the initial two test wells have been drilled. The exercise price is the issuance of 25,000,000 shares of EERG's common stock. To maintain the option, EERG must pay HNG $20,000 every six months starting July 1, 2008 and ending July 1, 2010, which means that EERG expects to be obligated for up to five option payments.
In connection with the HNG transaction, EERG is pleased to announce that Mr. Craig Phelps has joined the Company as Vice President of Engineering. Mr. Phelps has more than 27 years of experience in the oil and gas industry, including many years of experience in assessing wellbore and reservoir performance and implementing technical approaches to maximize economic returns from the field. Mr. Phelps has worked on produced water management for reservoirs in the US, Venezuela, West Africa, the Gulf of Mexico, Canada, and the North Sea.
In addition, EERG is announcing that Paul Rumler has been elected to its board of directors. Mr. Rumler specializes in corporate, limited liability company, and partnership matters, non-qualified employee benefit programs, and corporation, partnership and estate tax planning. He has structured franchise and license agreements, mergers, consolidations, reorganizations, liquidations and dissolutions. He is a partner in the Rumler, Tarbox, and Leyden Law Corporation.
Our Chief Executive Officer, Brad Colby, is the sole owner of Westport Petroleum Company. Messrs. Colby, Phelps, and Rumler are the owners of Heritage Natural Gas Company.
On November 20, 2007, EERG and our chief executive officer were served with a summons and complaint, styled Zavanna LLC, a Colorado limited liability company; Prairie Petroleum, Inc, a Colorado corporation; Trapper Oil Company, Inc., a Colorado corporation; Zavanna Canada Corporation, a Nova Scotia unlimited liability company v. Brad Colby; Eternal Energy, Inc., a Nevada corporation; Pebble Petroleum, Inc., a British Columbia corporation; Steven Swanson; Fairway, LLC, a Colorado limited liability company; ABC Corporation; DEF Limited Partnership; and John Doe 1-10, District Court, City and County of Denver, Colorado case No. 07-CV-10775. Plaintiffs have pled claims for relief against EERG and our CEO for breach of contract, misappropriation of confidential and proprietary information and of trade secret and claims under the Colorado Uniform Trade Secrets Act, fraud, declaratory relief declaring any agreements of release to be void and unenforceable as they were obtained by fraudulent inducement; declaration of accounting and constructive trust for all proceeds and profits from the alleged misappropriation; injunctive relief for return of all allegedly misappropriated information and cessation of use; civil theft of business values; and tortious interference with contract. Plaintiffs seek compensatory and punitive damages in an unspecified amount, prejudgment interest, declaratory relief, injunctive relief, accounting, and attorneys' fees. On December 28, 2007, Plaintiffs filed an amended complaint which, among other things, removed Ryland Oil Corp.'s wholly owned Canadian subsidiary, Pebble Petroleum Inc., as a named party to the legal action. EERG believes that the causes of action are without merit and intends vigorously to defend our rights and those of our CEO.
About Eternal Energy Corp.:
Eternal Energy Corp. is an oil and gas company engaged in the exploration of petroleum and natural gas. The company was incorporated in Nevada on July 25, 2003 to engage in the acquisition, exploration, and development of natural resource properties.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"' for forward-looking statements. Certain information included in this press release contains statements that are forward-looking, such as statements relating to the future anticipated direction of the industry, plans for future expansion, various business development activities, planned capital expenditures, future funding sources, anticipated sales growth, potential contracts, and/or aspects of litigation. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and, accordingly, such results may differ from those expressed in any forward-looking statements made by, or on behalf of, Eternal Energy Corp. These risks and uncertainties include, but are not limited to, those relating to development and expansion activities, dependence on existing management, financing activities, and domestic and global economic conditions.
Eternal Energy Corp.
CONTACT: Jamie Kelley, Investor Relations, for Eternal Energy Corp.,
+1-604-730-2776