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American Eagle Energy Increasing Interests In Spyglass

Stocks in this article: AMZG

DENVER, Aug. 19, 2013 /PRNewswire/ --  American Eagle Energy Corporation (OTCQX: AMZG) (the "Company" or "American Eagle") announced today that it has entered into a Purchase, Sale and Option Agreement with a Joint Venture Partner ("JV Partner") that increases the Company's net acreage and share of production on wells that it currently operates, as well as interests in future wells that it plans to develop as the operator in its Spyglass Project area in the Williston Basin in northwestern Divide County, North Dakota.

Highlights of Agreements

  • For cash consideration of $47 million, American Eagle agrees to acquire from the JV Partner approximately 9,300 net acres in Spyglass with current production of approximately 600 barrels of oil equivalent per day ("BOEPD");
  • American Eagle has an option through March 2014 to acquire from the JV Partner an additional 9,300 net acres in Spyglass that is currently producing approximately 600 BOEPD for an additional $47 million.

Purchase, Sale and Option Agreement with JV Partner

American Eagle and the JV Partner are parties to a Joint Operating Agreement ("JOA"), pursuant to which American Eagle is the operator. The JV Partner has agreed to sell a portion of its interests in Spyglass to American Eagle in a Purchase, Sale and Option Agreement dated August 12, 2013 and approved August 16, 2013. At closing, which is scheduled for September 30, 2013, American Eagle will pay $47 million in cash to the JV Partner for approximately 9,300 net acres in the Spyglass Project area in northwestern Divide County, North Dakota ("First Property"). The purchased assets include approximately 600 BOEPD of current production. The effective date of the transaction will be June 1, 2013. Purchase price adjustments will be included for well production, operating expenses and development costs that occur after the effective date.

American Eagle has an option to purchase additional interests of approximately 9,300 net acres ("Second Property") in the same Spyglass Project area in northwestern Divide County, North Dakota with current production of approximately 600 BOEPD for an additional $47 million. The option may be exercised by American Eagle anytime within 180 days after the close of the First Property, which would be March 29, 2014, based on the current scheduled close date. If exercised, the effective date of the second transaction would also be June 1, 2013.

Impact of Purchase, Sale and Option Agreement on American Eagle

During second quarter of 2013, American Eagle reported sales production that averaged approximately 1,300 BOEPD. The Company has operating control of 14 contiguous drilling spacing units ("DSUs") in a proved area within its Spyglass Project with an average working interest of approximately 40%. American Eagle has interests in a total of approximately 15,900 net acres in Spyglass with operable control of approximately 39 DSUs. Upon the closing of the First Property purchase transaction, the Company estimates that its average net production for second quarter 2013 on a pro forma basis would be approximately 1,900 BOEPD, with an average working interest of approximately 52% on its 14 proved DSUs and a total of approximately 25,100 net acres in Spyglass. Should American Eagle exercise the option to purchase the Second Property, the Company estimates that its average net production for second quarter 2013 on a pro forma basis would be approximately 2,500 BOEPD, with an average working interest of approximately 63% on its 14 proved DSUs and a total of approximately 34,400 net acres in Spyglass.

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