The Perth-listed company said it had acquired a 50% interest in private Canadian exploration and production company Surf Petroleum for $US5 million ($A6.8 million), half of which was to be paid for in cash and the rest under a convertible note issue.
As Surf was totally focused on the San Joaquin Basin, this acquisition should increase Nuenco’s Californian exposure by a factor of 18 and lead to commensurate increases in exploration, appraisal and development opportunities for Nuenco, said managing director Anthony Kain.
Nuenco had been evaluating opportunities to expand its Californian activities since becoming active there in 2004.
“This transaction achieves that objective and we believe the current leads and prospects developed from this acreage will allow Nuenco to dramatically increase its activities in the San Joaquin Basin where the company is currently production testing a shallow gas discovery and a deep oil discovery at South East Lost Hills,” said Kain.
Surf’s petroleum team had over four decades of EP experience in the basin and had an option to explore and develop a massive land area, approximately 60,000 hectares, in some of the most prospective parts of the basin.
Surf’s strategies – of developing non-conventional oil reserves, exploring for shallow gas fields, and drilling for conventional oil on the edge of major fields – were consistent with those of Nuenco.
“This is one of the best operating environments for oil and gas in the world.”
There was high value for products, abundant and easy access to infrastructure and low risk. High oil prices had reduced the economic field threshold sizes and stimulated investment across all facets of the industry.
Technological advancements in drilling and completing wells, combined with improved recovery of hydrocarbons via fracture stimulation, would continue to mean enormous volumes of additional oil and gas could be extracted from mature basins.
Kain said Nuenco’s current objectives included developing a gas field from its first project at South East Lost Hills; developing a major oil resource from the acreage around the Lost Hills oil field; and maximising the value it could extract from the emerging North Yolumne oil play.
“Nuenco is delighted to have concluded a deal which involves a significant expansion of its core business of exploration and production of oil and gas in the San Joaquin Basin,” he said.
“Since getting involved in the basin, Nuenco has achieved a 100% exploration success rate, which has provided the encouragement to expand its business via the Surf acquisition.
“Nuenco believes the high oil and gas prices, combined with good recent drilling results in the basin, will drive up the value of the leases. This transaction gives the opportunity to access high quality acreage without expending large amounts of capital on exploration leases.”