U.S. Energy Corp. (USEG) plans to dip its toes in the Niobrara-Denver Julesburg (DJ) Basin, with a $9.6 million deal to participate in development in the Wattenberg Field in Weld County, CO.
The Denver-based exploration and production (E&P) company said it has entered into a non-binding letter of intent with IronHorse Resources LLC to acquire a 40% interest in an IronHorse farmout agreement to drill in the Niobrara-DJ Basin.
USEG said it will acquire an 11.6% average working interest in 21 horizontal wells in the A, B and C benches of the Niobrara, as well as the Codell formation.
The development program is expected to begin later this year and continue into 2017. For its $9.6 million commitment to drill and complete the wells, USEG said it expects to generate net revenues of $4.9 million in each of the first two years at $47/bbl and $2.78/Mcf, assuming future strip pricing and differentials.
The company said its foray into the Wattenberg is part of an ongoing “transformation” that will see USEG “solely focus on its ongoing oil and gas business.”
“U.S. Energy Corp.hopes to grow its position in the DJ Basin while leveraging this experience into an operated position in the future,” CEO David Veltri said. “We continue to look for acquisitions of producing properties, consolidating our current positions in the Bakken and Eagle Ford trends in addition to divesting non-strategic assets."
USEG’s current assets include acreage in the South Texas Eagle Ford, the WIlliston Basin and the Louisiana Gulf Coast.
The Niobrara-DJ Basin is a crude oil- and liquids-rich gas play located in Northeast Colorado and Southeast Wyoming. More detailed information on the Niobrara-DJ can be found in NGI’s North American Shale & Resource Plays 2016 Factbook.