Red Sky Energy (ASX:ROG) has received an independent expert’s report valuing the 50% interest in the Cache Oilfield in Colorado that it is acquiring at $30 million.
The valuation is based on existing reserve of 19.58 million barrels of oil and an estimated recoverable reserve of between 5.1-6.0 million barrels.
Red Sky is acquiring the stake for between $1.2 million and $2.1 million through the issue of 1.2 billion to 2.1 billion ROG shares. This is dependent on the amount of capital raised as part of the transaction.
The company is raising a minimum of $700,000 and a maximum of $1.85 million through the issue of between 700 million and 1.85 billion shares at an issue price of $0.001 each.
Cache was discovered in 1964 by Amoco and is located in the Paradox Basin, Montezuma County, Colorado.
The field covers 1840 acres and is 16 kilometres east of the Greater Aneth Field (1.5 billion barrels original oil in place and peak production of 100,000 barrels of oil per day).
Production records indicate that approximately 5 million barrels of high quality, sweet oil have been produced from Cache.
The company intends to use modern horizontal-multilateral drilling and completion techniques to potentially enhance the oil production rates.
By drilling laterally within the reservoir intervals the company believes it can maximise the probability of intersecting zones of higher porosity and permeability leading to sustainable oil flow rates.
Red Sky is proposing to complete an initial two well program to test if modern drilling techniques can enhance oil recovery and flow rates as well as test the possibility of finding primary oil reserves in the southern part of the field.
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