(MENAFN- ProactiveInvestors)
NL ) formerly Quest Petroleum (ASX:QPN) has provided an strategic update on the binding term sheet signed with First Nations Exploration Company Keyano Pimee Exploration Company Limited (KPECL) on its Alberta Oil Sands Project in Canada.
The agreement is to farm in to 82290 acres of Cold Lake oil sands in Alberta.
Since the signing of the term sheet Indus has held several meetings with KPECL and associated Cree Nations Chiefs in Alberta and negotiations have now advanced towards finalising and executing the Joint Operating Agreement.
This provides Indus with an opportunity to partner with a Cree First Nations oil exploration and gas production company that owns a large scale multi target drill-ready land position in a significant oil and gas producing location in Canada’s first ranking oil production province.
Once the JOA is executed Indus will commence Phase 1 of the work program which will consist of low cost re-entry of four historic wells in areas where oil occurrences have been encountered during gas production activities on KPECL lands.
Priority is to look at a program of low cost re-entry wells while also taking advantage of the current market conditions which is seeing debt forced divestiture of land positions in the Cold Lake Area of Interest (AOI).
This provides a significant opportunity for acreage covering known heavy oil sands occurrences already been freed up to be snapped up at low acquisition and holding costs to add to existing and planned joint land positions.
This would result in the added benefits of the phase 2 conventional vertical well program being scheduled over a larger geographical area with the aim of delineating significantly increased reserves for similar expenditure
Due diligence
Extensive due diligence has already been completed by the company’s project advisors Alberta based Apex Energy Consultants including the evaluation of over 1000 production wells and associated data within or in close proximity to the Project areas and AOI.
Upon the signing of the JOA the Company expects to move rapidly forward with Phase 1 and the additional land acquisition programs.
Strategy
Indus is looking at acquisitions where the current project economics still provide optimal terms even at currently depressed oil prices.
KPECL and the Company are working together to ensure that the JOA enshrines this flexibility and that any associated work programs are profitable at current oil prices as well as look for additional opportunities in the region.
Board appointment
Indus has appointed Marcus Gracey to the Board as a non-executive director. Gracey is a commercial and corporate lawyer and currently the business development manager and general counsel at () and a non-executive director of ().
Analysis
In the current market of low oil prices Indus the JV partners have an opportunity to acquire "distressed" properties prospective for oil sands in Alberta at potentially bargain basement prices.
The farm in to 82290 acres of Cold Lake oil sands in Alberta Canada is a material agreement.
The Cold Lake region is contributing an estimated 500000 bopd and is one of three major oil sands deposits in Alberta. Alberta ranks first in crude oil reserves and production in Canada.
Significantly Cold Lake recovery economics demonstrate viability even at current oil prices and the likelihood of a speedy low-cost pathway to production revenues for Indus and KPECL.
This provides valuation potential significant for the junior with a market cap of circa $4 million in the short to medium term. It also provides a workable plan and a platform for Indus to accelerate plans to becoming a North American oil producer.
With the focus on achieving low cost production in Alberta a review of its Indonesian assets is underway.
The addition of Marcus Gracey to the board of directors is an impressive addition where Gus Simpson of () fame and Anthony Milewski round out an experienced energy board.
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