early focus of the Company's drilling program is to
define the heavy oil reservoir one section at a time and
attempt to initiate production from each drilled
location as soon as is practical in order to generate an
early positive cash flow.
Deep Well Oil & Gas,
Inc. through its wholly owned subsidiaries, Northern
Alberta Oil Ltd. and Deep Well Oil & Gas
(Alberta) Ltd., has a 90% working interest in 51
sections on seven oil sands leases, an 80% working
interest in 5 sections on one oil sands lease, and
a 25% working interest (post Farmout) in an additional
12 sections on two oil sands leases in the Peace
River oil sands area of Alberta, all of these sections
are contiguous. These nine oil sands leases cover
43,015 gross acres (17,408 gross hectares) of land.
Of the 68 contiguous sections on nine oil sands leases
we are the operator on 56 sections on seven leases
where we have working interest ranging from 80% to
In December of 2012, we entered into a purchase and sale agreement with 1132559 Alberta Ltd. (“113”), one of our former joint venture partners, whereby we acquired 113’s 10% working interest in their Sawn Lake heavy oil reservoir in the Peace River area of Alberta. Currently we have a 90% working interest in 51 contiguous sections on seven oil sands leases and an 80% working interest in 5 contiguous sections on one oil sands lease in the Peace River oil sands area of Alberta, where we are the operator. In addition, we have a 25% working interest, post Farmout Agreement, in another 12 contiguous sections on two oil sands leases in the Peace River oil sands area of Alberta, Canada. Theses oil sands leases cover 17,408 gross hectares (43,015 gross acres).
On July 30, 2013, we entered into a SAGD Demonstration Project Agreement with our joint venture partner to participate in a recently AER approved SAGD Demonstration Project on our 25%, post Farmout Agreement, owned joint lands in Sawn Lake.
On July 31, 2013, we entered into a farmout agreement (the “Farmout Agreement”) with MP West Canada SAS (the “Farmee”), a wholly-owned subsidiary of Saint-Aubin Energy (owned 1/3 by Maurel et Prom and 2/3 by MPI, two listed companies based in Paris, France – “Maurel et Prom”), to fund our share of the recently approved Alberta Energy Regulator (“AER”) Steam Assisted Gravity Drainage demonstration project (“SAGD Demonstration Project”) at our Sawn Lake heavy oil reservoir in the Peace River oil sands region of Northern Alberta. In accordance with this Farmout Agreement, the Farmee has agreed to provide up to $40,000,000 in funding for our portion of the costs for the SAGD Demonstration Project, in return for a net 25% working interest in 12 sections where we have a working interest of 50%.
On July 31, 2013, and as required by the Farmout Agreement, the Farmee deposited into trust with our Company's legal counsel, the amount of $12,103,512 to pay for our Company’s initial share of the costs for the SAGD Demonstration Project. The Farmee will also provide funding to cover monthly operating expenses of our Company, of which the first such payment shall be in respect of the month of August 2013 and shall not exceed $30,000 per month. In addition, the Farmee has the option to elect to obtain a working interest ranging from 40% to 45% in the remaining 56 sections of land where we have working interests ranging from 80% to 90%, by committing $110,000,000 of financing for the development of our Sawn Lake project. Maurel et Prom is France’s second largest oil and gas company and has proven experience as an oil operator with a presence in Africa and Latin America. In 10 years, Maurel et Prom has drilled more than 100 exploration wells and discovered major fields at minimum cost. Currently working in 10 countries on 4 continents, Maurel et Prom is focused on exploration and maximization of the value of its acreage. Maurel et Prom’s management is comprised exclusively of professionals with strong track records in the oil and gas industry.
On July 31, 2013, in addition to and as contemplated by the Farmout Agreement, we also completed a private placement financing with MP West Canada SAS, for aggregate gross proceeds of $22,000,000. We sold 45,111,778 common shares to MP West Canada SAS at a price of $0.488 per common share. The common shares will be issued to MP West Canada SAS on or before November 30, 2013 and on October 16, 2013 we issued MP West Canada their common shares.
On August 15, 2013, we gave notice to our joint venture partner that we have elected to participate in the SAGD Demonstration Project and have secured funding for the project.
On October 16, 2013, our joint venture partner and operator of the SAGD Demonstration Project commenced drilling the first of two horizontal wells for the joint SAGD Demonstration Project. This well will be drilled to a vertical depth of approximately 650 metres with a horizontal leg of approximate 750 metres targeting the Sawn Lake Bluesky reservoir zone. Once this first horizontal well is drilled it is anticipated that the operator will immediately drill the second horizontal well of the first SAGD well pair for the SAGD Demonstration Project.
The 2013 phase of the SAGD Demonstration Project consists of the drilling of two horizontal wells (known as one SAGD well pair), the construction of a steam generation facility, water handling and oil treating, along with water source and disposal well facilities. It is anticipated steam operations will commence in December 2013 with first oil production anticipated in the first calendar quarter of 2014.