Minneapolis-based Avalon Oil and Gas Inc. has formed a limited partnership (LP) with Drax Holdings N.A. with the intention of purchasing non-operated oil and gas properties currently producing in Oklahoma and Texas.

Avalon said Drax, a Canadian corporation, has invested $600,000 in the Delaware-based LP, which is officially known as Avalon 2015-1 LP. Initially, Drax will receive 98% of the revenues from the LP, while Avalon will receive the remaining 2%. Once Drax receives 100% of its investment from revenues from the sale of oil and gas, Avalon will increase its share of revenues from 2% to 30%.

“With the continued weakness in the market price for oil and natural gas, we believe that we can purchase producing properties with an internal rate of return of at least 25%,” said Avalon CEO Kent Rodriguez. “We look forward to this opportunity to identify and acquire assets for [the LP], and to continue to build long-term shareholder value for Avalon.”

Rodriguez added that Avalon was “currently negotiating with two existing shareholders to form Avalon 2015 -2 LP, and hope to close another LP before year-end.”

According to Avalon’s website, the company holds a working interest (WI) on wells in four states: Arkansas, Louisiana, Oklahoma and Texas. It holds a 50% WI on the E.A. Chance #1 and #2 wells in Camp County, TX; a 50% WI on the Dixon Heirs #1, Deltic Farms & Timber #1 and Gunn #1 wells targeting the Kiblah Field in Miller County, AR; a 15% WI in the Janssen #1A well targeting the Roeder Sand formation in Karnes County, TX; a 5% WI in the Waters Well in Lipscomb County, TX; and a 70% WI in five Grace wells in Lincoln County, OK.

Avalon also holds a 0.7% WI in three units producing more than 1,000 b/d in the Lake Washington Field, in Plaquemines Parish, LA.