Mr. Mackenzie Loree reports
LAND ACQUISITION AND COMPLETION OF INITIAL COMMITMENT
Further to the previously released news release dated March 31, 2017, Cerus Energy Corp. has entered into an agreement with Vital Energy Inc.
Cerus has agreed and committed to finance Vital for up to $10.5-million to acquire land, and drill, frac, test, complete and equip up to seven one-mile horizontal test wells on Vital's 100-per-cent-owned Pennant area project lands located in southwestern Saskatchewan.
Phase 1 drilling program
The seven-well drilling program will be phase 1 on a project that has identified an additional 27 drilling locations on the current Pennant area project lands (3,360 acres). The primary target is medium gravity (21 degrees) oil from the Upper Shaunovan formation. Vital will be the operator of the phase 1 drilling program. Drilling is expected to commence immediately after spring breakup in 2017.
Under the terms of the agreement, Cerus will pay up to $10.5-million for 100 per cent of the costs incurred by Vital to acquire lands posted for sale by Vital at the April 11, 2017, Saskatchewan public Crown land sale, and to drill, frac, test, complete and equip up to seven wells on Vital's current Pennant area project lands as a condition of earning.
Cerus will be entitled to receive 80 per cent of the net profits generated by the sale of petroleum substances from the phase 1 wells and their respective drilling spacing units. Once Cerus has recovered 180 per cent of its investment back from the 80-per-cent net profits interests, Cerus will convert its net profits interest to a non-convertible 5-per-cent gross overriding royalty in the phase 1 wells and their respective drilling spacing units.
Under the terms of the agreement, Cerus will have the first right of refusal to finance additional phases of development drilling on all of Vital's Pennant area project lands on the same terms and conditions as for the phase 1 wells.
Vital announces that Cerus has made the first cash advance of $360,000 to Vital under the terms of the agreement. Vital was successful in acquiring four leases at the April 11, 2017, Saskatchewan Crown land sale. The lease acquisitions totalled 5,220 acres, more than doubling Vital's current Pennant area project lands and bringing the total 100-per-cent-owned Pennant area project lands to approximately 8,580 contiguous acres.
About Cerus Energy Group Ltd.
Cerus is a Tier 2 Canadian-based oil and gas exploration company with property assets in both Alberta and Saskatchewan.
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