Equus Total Return, Inc. (NYSE: EQS) (“Equus” or the “Company”)
today announced the closing of a Purchase and Sale Agreement
(“PSA”) between Morgan E&P, LLC, (“Morgan”), a wholly-owned
subsidiary of Equus, and Pro Energy I, LLC (“Pro Energy”). Pursuant
to the PSA, Morgan has acquired 4,747.52 net acres, in the
Bakken/Three Forks formation in the Williston Basin of North
Dakota.
In addition to other terms and conditions, including a payment
of $500,000, Morgan is required to drill and complete a minimum of
six wells within 18 months of receiving the first drilling permits.
The average cost of drilling a new horizontal well is approximately
$8.0 million. Morgan will receive an average net revenue interest
(“NRI”) of 80% in the production of any wells drilled.
The founders of Pro Energy have been involved in the successful
drilling of over 1,800 horizontal wells in the Williston Basin over
a ten-year span. Together, they have guided the transition of
drilling and completions techniques from Generation I (“Gen I”)
wells to the most recent Generation VI (“Gen VI”) wells.
Morgan engaged the petroleum engineering firm of Cawley,
Gillespie & Associates, Inc. (“CG&A”) to review and provide
a reserve analysis of the asset using forward strip pricing as at
May 16, 2023.
Using a discount rate of 10% (PV 10 Valuation) the values of
proved undeveloped, probable, and possible reserves associated with
the project are $6,444,503, $14,780,023, and $37,628,872,
respectively.
CG&A has confirmed forty-eight (48) gross drilling
locations, resulting in approximately fifteen (15) net drilling
locations. As additional net acreage and working interests are
acquired, the resulting number of net drilling locations and
associated reserves is expected to increase accordingly. Neither
CG&A nor Morgan can guarantee any amounts that may be
recoverable from these properties. However, based on a historical
analysis of the geologic strata that are the subject of Morgan’s
development rights, CG&A has noted the estimated ultimate
recovery (“EUR”) from a single well is expected to be approximately
811,475 barrels of oil equivalent.
Morgan engaged Nichols Energy Services to assist with land due
diligence and Earth Systems, LLC for environmental and regulatory
due diligence.
About Morgan
Morgan is an upstream exploration and production company focused
on the development of oil and gas assets throughout North America.
Morgan is a wholly-owned subsidiary of Equus.
About Equus
The Company is a business development company that trades as a
closed-end fund on the New York Stock Exchange under the symbol
"EQS". Additional information on the Company may be obtained from
the Company’s website at www.equuscap.com.
The SEC permits oil and gas companies, in their filings with the
SEC, to disclose only proved, probable and possible reserves that a
company anticipates as of a given date to be economically and
legally producible and deliverable by application of development
projects to known accumulations. We use certain terms in this press
release, such as EUR (estimated ultimate recovery) and total
resource potential, that the SEC's rules strictly prohibit us from
including in filings with the SEC. These measures are by their
nature more speculative than estimates of reserves prepared in
accordance with SEC definitions and guidelines and accordingly are
less certain. We also note that the SEC strictly prohibits us from
aggregating proved, probable and possible reserves in filings with
the SEC due to the different levels of certainty associated with
each reserve category. In addition, PV-10 is a non-GAAP financial
measure, which differs from the GAAP financial measure of
“Standardized Measure” because PV-10 does not include the effects
of income taxes on future income. The income taxes related to the
acquired properties are unknown at this time and are subject to
many variables. As such, the Company has not provided the
Standardized Measure of the acquired properties or a reconciliation
of PV-10 to Standardized Measure.
While the Company believes its assumptions concerning future
events are reasonable, a number of factors could cause actual
results to differ materially from those expected, including, but
not limited to: the risk that the assets acquired by Morgan do not
perform consistent with our expectations, including with respect to
future production or drilling inventory; conditions in the oil and
gas industry, including supply/demand levels for crude oil and
condensate, NGLs and natural gas and the resulting impact on price;
changes in expected reserve or production levels; changes in
political or economic conditions in the U.S., including interest
rates, inflation rates and global and domestic market conditions;
actions taken by the members of the Organization of the Petroleum
Exporting Countries (OPEC) and Russia affecting the production and
pricing of crude oil and other global and domestic political,
economic or diplomatic developments, capital available for
exploration and development; voluntary or involuntary curtailments,
delays or cancellations of certain drilling activities; well
production timing; liabilities or corrective actions resulting from
litigation, other proceedings and investigations or alleged
violations of law or permits; drilling and operating risks, lack
of, or disruption in, access to storage capacity, pipelines or
other transportation methods; availability of drilling rigs,
materials and labor, including the costs associated therewith;
difficulty in obtaining necessary approvals and permits, the
availability, cost, terms and timing of issuance or execution of,
competition for, and challenges to, mineral licenses and leases and
governmental and other permits and rights-of-way, and our ability
to retain mineral licenses and leases; non-performance by third
parties of contractual or legal obligations; hazards such as
weather conditions, a health pandemic (including COVID-19), acts of
war or terrorist acts and the government or military response
thereto, security threats, including cybersecurity threats and
disruptions to our business and operations from breaches of our
information technology systems, or breaches of the information
technology systems, facilities and infrastructure of third parties
with which we transact business, changes in safety, health,
environmental, tax and other regulations, requirements or
initiatives, including initiatives addressing the impact of global
climate change, air emissions, or water management; impacts of the
Inflation Reduction Act of 2022, and other geological, operating
and economic considerations.
This press release may contain certain forward-looking
statements regarding future circumstances, including statements or
assumptions about actual or potential production, hydrocarbon
reserves, recovery rates and amounts, drilling locations, capital
expenditures, or operating results. These forward-looking
statements are based upon the Company’s current expectations and
assumptions and are subject to various risks and uncertainties that
could cause actual results to differ materially from those
contemplated in such forward-looking statements including, in
particular, the performance of the Company, including our ability
to achieve our expected financial and business objectives, changes
in crude oil and natural gas prices, the pace of drilling and
completion activity on properties or acreage rights owned by Morgan
or other of the Company’s subsidiaries, infrastructure constraints
and related factors affecting such properties, cost inflation or
supply chain disruptions, ongoing legal disputes, the Company’s
ability to acquire, whether through Morgan or other of the
Company’s subsidiaries, additional development opportunities,
changes in reserves estimates or the value thereof, general
economic or industry conditions, nationally and/or in the
communities in which the Company or its subsidiaries conduct
business, changes in the interest rate environment, legislation or
regulatory requirements, conditions of the securities markets,
increasing attention to environmental, social and governance
matters, Morgan’s ability to acquire additional acreage and
development rights (including the transactions described herein),
and the other risks and uncertainties described in the Company’s
filings with the SEC. Actual results, events, and performance may
differ. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as to the date hereof.
Except as required by law, the Company undertakes no obligation to
release publicly any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. The
inclusion of any statement in this release does not constitute an
admission by the Company or any other person that the events or
circumstances described in such statements are material.
Contact:Patricia Baronowski Pristine Advisers, LLC(631)
756-2486
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