Stock Symbol: TSX: VUL
Shares issued: 35,278,384
ST. JOHN'S, NL, June 22 /CNW/ - Vulcan Minerals Inc. ("the Company"
TSX-V: VUL), the Company is pleased to announce that it has entered into an
arms length farmout agreement with a private Alberta corporation (Enerhance
Resources Inc.) to acquire a working interest in seven sections of land (4,480
acres) near Medicine Hat, Alberta. The Company may earn an 85% working
interest before payout and a 75% working interest after payout by paying
$400,000 cash and 100% of the drilling, completing and equipping costs of 16
wells. A further 10 wells on the lands would be at 75% cost to Vulcan.
Underlying encumbrances in the lands amount to 10% overriding royalties. The
$400,000 cash portion of the transaction includes the purchase and
re-completion of two shut-in existing wells, both believed to be capable of
commercial production of gas with proper stimulation. Five new wells are to be
drilled prior to August 8, 2006 as per Phase I of the project at an estimated
cost of $1,500,000.
The lands cover a portion of the prolific Medicine Hat gas field and
specifically include the rights to the Medicine Hat sands in an area of
bypassed pay. A preliminary Resource Potential Assessment has been prepared by
Chapman Engineering Ltd. of Calgary, Alberta pursuant to National Instrument
51-101 and concludes that the total project has a Best Estimate of Potential
Recoverable Gas in Place of 20.9 BCF, a Low Estimate of 6.9 BCF and a High
Estimate of 49.5 BCF based on historic data from offsetting production.
Vulcan's share would be 85% before payout and 75% after payout as described
above. Total costs to Vulcan for a complete 26 well package is estimated at
$7,000,000. Vulcan's participation in the complete package of wells is
contingent on results. The risks to recovering commercial gas from the lands
relate to reservoir quality and the efficiency of hydraulic fracture
stimulation of the reservoir as described in the Chapman report. A copy of
this report is being finalized and will be filed with Sedar and available on
the Company's website when finalized. A finder's fee in the amount of a 1%
gross overriding royalty before payout and a 2% gross overriding royalty after
payout is payable to an arms-length party on the Company's working interest
share.
The Company has sufficient funds to carry out Phase I of the project and
will finance further expenditures from cash flow and or additional equity or
debt financing. The agreement is subject to approval by the TSX Venture
Exchange.
This acquisition will complement the Company's ongoing exploration
activities in Western Newfoundland by providing a source of cash flow which
will reduce future dilution to finance activities in Western Newfoundland. It
will not diminish the Company's confidence and resolve to advance the onshore
Western Newfoundland petroleum project and the high-impact rewards that the
project can potentially deliver. An update on Western Newfoundland will be
issued shortly.
The Company proposes to issue 650,000 incentive stock options to
Directors exercisable at $0.40 for a period of 5 years and 75,000 incentive
stock options to employees and consultants exercisable at $0.40 for a period
of 2 years, subject to TSX Venture Exchange approval. The Company has reserved
for issuance 3,527,838 shares pursuant to its stock option plan of which
2,686,250 have been granted, including the grant described herein.
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The TSX Venture Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
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