• Kilgore Oil and Gas to acquire 51% interest (via a Share Sale Agreement) in highly prospective conventional gas and Coal Seam Gas ('CSG') permits (with the option to move to 100% interest);
• The permit areas cover approximately 2,050km2 in the highly prospective New South Wales Clarence Moreton Basin with the potential for the discovery of CSG in more than one formation;
• Potential to host gas in place within the combined permit areas of 7.3 Trillion Cubic Feet (TCF) of Coal Seam Gas (CSG);
• In addition to CSG, the permit area is prospective for the discovery of gas in conventional sandstone reservoirs with the largest conventional gas discovery in the history of New South Wales oil and gas exploration (Metgasco Kingfisher E1 project) located adjacent to one of the permit areas;
• Kilgore to fast track exploration activities with drilling and an aggressive exploration program planned for 2010;
• The Company has received strong interest from brokers to raise a minimum of $2.0m on the back of the acquisition.
Kilgore Oil and Gas Limited has entered into an agreement to acquire 51% of the issued capital of Clarence Moreton Resources Pty Limited ('CMR') that has 100% interest in three permits in the highly prospective Clarence Moreton Basin, New South Wales region of Australia.
CMR has 100% interest in both the conventional and coal seam rights of Petroleum Exploration License ('PEL') 457, 478 and 479 ('the Project'). The permit areas cover an approximate area of 2,050km2, are located close to planned gas infrastructure and adjacent to significant acreage positions held by major CSG/LNG companies.
Subject to the satisfaction of certain terms and conditions Kilgore proposes to acquire 51% of CMR through the issue of 175 million fully paid Kilgore shares ('Shares') together with 175 million Kilgore options ('Options') exercisable at $0.05 on or before 30th June 2012. On closing of the transaction CMR will become a majority owned subsidiary of Kilgore.
Kilgore has also secured an option to acquire the remaining 49% of CMR through the issue of additional Shares and Options and the payment of an annual royalty on gross sales arising from the Project.
Commenting on the acquisition, the Chairman of Kilgore, Mr Gordon Sklenka, said, 'the excellent commercialisation opportunities with the mix of coal seam gas and conventional gas in a strategic location provides Kilgore with an excellent base for strong growth.'
The Project is situated in the southern half of the Clarence-Moreton Basin covering approximately 2050km2 in one of the most sought after gas exploration addresses in Australia. The overall prospectivity of the permit areas is high as the Clarence-Moreton Basin is underexplored for coal seam gas. Opportunities for discovery of a new gas field are promising as the permit areas held cover a wide area of the basin with potential in more than one play type, providing an excellent basis for success.
The Project is well located with recent Coal Seam Gas (CSG) exploration success in the Casino area. In particular, PEL 479 is immediately south of Metgasco Ltd PEL 16. Metgasco Ltd released to the ASX an update to its independently certified CSG reserves within PEL 16 on 16 February, 2009. In the ASX release titled 'Metgasco Increases Gas Reserves', Metgasco state CSG reserves from six of the eleven graticular blocks within PEL 16 of:
• 2.7 Bcf (Proved)
• 396.7 Bcf (Proved and Probable)
• 2,239.3 Bcf (Proved and Probable and Possible)
In addition there is also potential for the discovery of conventional gas in sandstone reservoirs.
PEL 479 is adjoining and immediately south of Metgasco Kingfisher E1 conventional gas field. According to Metgasco (Australian Stock Exchange announcement dated 28 January 2010 titled 'Kingfisher E1-first test zone flows at 2.97 million scfd') their initial analysis is that the field contains a contingent resource of:
• 77 Bcf (Proved and Probable) and
• 284 Bcf (P90)
This contingent resource is the largest conventional gas discovery in the history of New South Wales oil and gas exploration and confirms Kilgore's confidence in the Clarence Moreton Basin as an underexplored basin with substantial potential for both conventional hydrocarbon resources and coal seam gas.
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