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RIVERTON, Wyo., Feb. 22, 2011 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (Nasdaq:USEG) ("USE" or the "Company"), announced today that it has entered into a participation agreement with Crimson Exploration Inc. (Nasdaq:CXPO) ("Crimson") to acquire a 30% working interest in an oil prospect and associated leases located in Zavala County, Texas.
Under the terms of the agreement, USE will earn a 30% working interest (22.5% net revenue interest) in approximately 4,675 gross contiguous acres (1,402.5 net mineral acres) through a combination of a cash payment and commitment well carry. All future drilling and leasing will be on a heads up basis. For competitive reasons, the financial terms of the transaction will not be disclosed at this time.
The prospect is an Eagle Ford shale oil window target in Zavala County, Texas. Crimson will operate and tentatively plans to spud the first well in the area during the second quarter of this year. The well is planned to be drilled to a total drilling depth of approximately 12,500 feet (~6,000 ft. vertical, ~6,500 ft. horizontal), and to be completed with 14 fracture stimulation stages.
If successful, the well is planned to be put on production for several months to evaluate well performance and in order to properly plan and budget for an aggressive 2012 drilling program. It is estimated under current spacing that there is a potential for up to 26 gross (7.8 net) drilling locations on the acreage. Looking forward, USE and Crimson have identified and plan to jointly seek additional opportunities in the Eagle Ford Oil window on a heads up basis.
"We are pleased to announce another oil venture with a proven horizontal operator with a strong presence in Texas. This initial prospect provides us with the potential for multiple drilling locations over the next two to three years," said Keith Larsen, CEO of U.S. Energy Corp. "We look forward to working with Crimson and to further expanding our geographical resource diversity in this exciting oil producing region. The prospect also has potential in the Austin Chalk, Buda, Georgetown and Pearsall formations," he added.