Magnum Energy Inc.

Magnum Energy Inc.

March 16, 2011 09:30 ET

Magnum Energy Inc. Announces Closing of Acquisition of Viking Oil Producing Property

CALGARY, ALBERTA--(Marketwire - March 16, 2011) - Further to its press releases of March 10, 2011 and February 3, 2011, Magnum Energy Inc. (The "Company" or "Magnum") (TSX VENTURE:MEN) is pleased to announce that Magnum and its joint venture partner, Nextraction Energy Corp. ("Nextraction") have closed the acquisition of the Viking oil assets of a private company in the Provost area of Eastern Alberta.

The Viking oil asset includes four producing wells with cumulative average production from the 100% owned and operated vertical wells of approximately 30 barrels of sweet light crude per day. Additionally, the 100% owned infrastructure includes a battery, disposal well, and pipelines situated on 3.25 sections of largely undeveloped land. Preliminary technical evaluations indicate the potential to develop an inventory of a minimum of 12 to a maximum of 40 low-risk horizontal drilling locations. Westfire Energy Ltd. has applied to the ERCB for 4 wells per quarter section down spacing in immediately adjacent lands.

About the Provost Viking "A" formation:

In 1968, a unitization study was performed by McDaniel Consultants engineering evaluators which was submitted to the Energy Resources Conservation Board (ERCB) that indicated that the pool contained over 80 million barrels of original oil in place (OOIP). Cumulative recovered oil production to date from vertical wells drilled over the past 20 years is approximately 3 million barrels. Vertical wells in the Viking "A" pool have produced up to 300,000 barrels of oil per well. Horizontal wells drilled in the Viking trend that extends southeast to Dodsland in Saskatchewan and northwest to Redwater have unlocked the vast reserves from these pools with excellent economics.

About the Magnum /Nextraction joint venture agreement:

Terms of the JVA provide for the Companies to acquire the 100% owned property from a third private party for $2.8 million on a fifty-fifty basis. Nextraction shall fund 100% of the acquisition and receive 100% of the net revenue from existing production until payout of the Purchase Price, or until Magnum has paid to Nextraction 50% of the Purchase Price. Upon payout of the acquisition, production revenue will be distributed on a 50/50 basis.

Nextraction shall also pay 100% of the costs to drill and complete to tie-in two horizontal wells to earn its 50% interest. The wells are projected at 800 meters in depth and at least 900 meters horizontally, with the first well commencing before June 30, 2011. Preliminary estimated costs are $1.5 million per well. The Companies shall share revenue from the two wells on a 50/50 basis from the date of first production. Costs and revenue for subsequent development will then be shared on a 50/50 basis.

A geotechnical team, comprised of individuals from both Magnum and Nextraction with direct experience drilling both vertical and horizontal wells in Viking pools, will begin immediately with a determination of workovers in the existing vertical wells to optimize production. Preparations are also underway to drill two initial horizontal wells early this summer.

On behalf of the Company

Richard A. Nemeth, President and CEO 


Certain statements in this document may contain "forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation. Such forward-looking statements or information include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. The Company does not assume the obligation to update any forward-looking statement, except as required by applicable law.

The TSX Venture Exchange has neither approved or disapproved the contents of this press release.

Contact Information