Marking the international company’s first venture into the United States, Vancouver-BC-based Valkyries Petroleum Corp. (previously known as Santa Catalina Mining) said it has paid approximately US$1.1 million to acquire a major share in a large natural gas exploration project in one of the newest major gas producing regions in South Texas.

Located in the prolific Queen City gas trend, the project encompasses a large land position of over 12,000 acres. In recent years, the trend has yielded significant gas discoveries for operators such as Chevron in the vicinity of the 120 Bcf Mestena Grande field. Valkyries said the play consists of deltaic Queen City sands trapped along a regional fault trend. The company added that individual wells directly on trend produce an average of 5 MMcf/d and provide “excellent analogues” for prospects in the play area.

Valkyries said new 3D seismic has identified several “strong prospects” on its newly acquired property that range in size potential from 7 to over 30 Bcf of gas. The company said it plans to drill two wells in the first quarter of 2003. “The strong local gas market, nearby infrastructure and low drilling costs result in very favorable project economics,” the company said.

Pending success on the first two wells, the company said it will do a new 3D seismic survey in other areas. Valkyrie said it expects to use cash flow from the play to help finance additional exploration and production projects currently being evaluated in the international arena, with the aim of building a sizable, well-balanced portfolio of oil and gas assets.

“The Queen City Trend Project is an exciting start for Valkyries,” said CEO Keith Hill. “Queen City is an emerging major gas trend and the combination of a favorable risk profile, high profitability potential, high drilling success rates in the area and a ready gas market, provide for an excellent first project for the company.”

Located in Duval and Jim Hogg counties, TX, the Queen City plays are held by a private company. VPC is acquiring 75% of the company’s various interests in these concessions in exchange for paying 75% of the lease acquisition cost and the drilling of two exploration wells at an estimated drilling cost of US$2 million.

Hill said Valkyries is “still one of the elephant hunters” out there that is looking for big prospect acquisitions and development deals. “What we are looking for from this play is really cash generation,” Hill told NGI. “We are hoping to generate somewhere between US$5-8 million a year in cash flow.”

Valkyries Chairman Adolf H. Lundin said he will advance a portion of the acquisition cost of the Queen City project by providing a non-interest bearing bridge loan to the company in the amount of C$1,105,020. At the option of the Valkyrie, the loan may be paid out at any time without penalty. In exchange for the loan, the company has agreed to issue Lundin a bonus consisting of common shares of the company with a total market value of up to 5% of the amount of the loan or C$55,251.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.