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Eureka Energy drums up A$46.6M to fund big ramp-up in Sugarloaf drilling

Eureka Energy drums up A$46.6M to fund big ramp-up in Sugarloaf drilling

Eureka Energy (ASX:EKA) has secured a US$50 million (A$46.6 million) debt facility to fund its share of an aggressive drilling program aimed at increasing reserves and production at its flagship Sugarloaf shale gas project onshore Texas.

While, Eureka’s share of production from Sugarloaf for the December 2011 quarter was 25,631 barrels of oil equivalent, operator Marathon Oil (NYSE:MRO) has sketched out an aggressive drilling program that targets a major increase in both proved reserves and production.

The program will also evaluate the optimum well spacing to optimise the overall development plan, capital allocation and value realisation for the field, which produces from the liquids rich Eagle Ford shale.

Marathon had previously flagged it would spend half of its US$2.7 billion North American exploration and production budget on the Eagle Ford shale.

This include ramping up to 17 rigs and drilling 200 to 210 wells along with adding two additional fracture stimulation crews.

The Eagle Ford Shale area is considered to be one of the premium shale plays in North America, with around 200 rigs reported to be operating.

Total production from the Eagle Ford shale is currently estimated at over 200,000 barrels of oil equivalent per day (boe/d) and is expected to increase to over 1.2 million boe/d within the next 5-
6 years as various operators accelerate development of the estimated resources of 3 billion
barrels of oil and 20 trillion cubic feet of gas.

The first S$15 million tranche of the 3-year facility provided by Macquarie Bank is immediately available to Eureka.

Additional funds will be made available based on achieving reserves milestones.

The LIBOR-based facility requires Eureka to issue options as it draws down funds. The company had cash in hand of US$6.08 at the end of the December 2011 quarter.

Eureka has a 6.25% working interest in the Sugarloaf field.

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