SOURCE: Royalite Petroleum Company Inc.
October 04, 2007 07:00 ET
Royalite Petroleum Company Inc. Signs Option Agreement to Acquire Additional Utah Hingeline Acreage
AUSTIN, TX--(Marketwire - October 4, 2007) - Royalite Petroleum Company Inc. (OTCBB: RYPE)
("Royalite") has entered into an option agreement with Central Utah Lease
Acquisition, LP ("CULA") to purchase leasehold interests in approximately
108,000 acres located in Juab and Sanpete Counties, Utah. The acreage block
is located directly north of Wolverine Gas and Oil Company's 70,000-acre
Federal Unit and on trend with the Covenant Oil field, the largest onshore
oil field discovered in the United States since the East Anschutz Ranch
Field was discovered in 1979.
Under the agreement, Royalite will issue CULA 200,000 shares of its common
stock as consideration for an option to purchase an undivided 62.5% WI in
CULA's 66,700 net acres and become the Operator. Royalite will have the
option to purchase the 41,688 net acres (80% NRI) for $11.26 million plus
7.3 million common shares of Royalite. The option must be exercised on or
before November 21, 2007 and the closing date is November 26, 2007. In the
event the option is exercised, Royalite will be required to pay $1.5
million and assign 7.3 million shares of its common stock to CULA. The cash
balance of $9.6 million is scheduled to be paid in semi-annual installments
beginning December 31, 2007 and ending on June 15, 2009. As additional
consideration, Royalite will be required to carry CULA as a 25% working
interest owner through the completion or plugging of two wells drilled to
the top of the Jurassic Navajo formation or 12,000 ft., whichever is less.
Drilling of the first carried well shall commence on or prior to two years
of the closing date and the second well shall commence on or prior to the
three year anniversary of the closing date. Each carried well drilled will
initially earn Royalite a 160 drilling unit surrounding Royalite's selected
drilling locations. After the two wells have been drilled and completed or
plugged, CULA will assign the balance of the 41,688 net acres to Royalite.
In the event that Royalite does not exercise the option, it will have no
liability or any further obligations to CULA. There is no assurance that
funding will be available to Royalite or that the option will be exercised.
Royalite is currently seeking financing to fund the acquisition and initial
Royalite's President and CEO, Michael Cass, stated, "This transaction if
closed will give Royalite significantly more exposure to one of the most
exciting exploration plays in the United States. The size of the seismic
structures identified to date within this acreage block gives Royalite the
opportunity to explore for potential oil and gas reserves equivalent to a
billion barrels of oil."
The initial "Keystone" prospect located within the acreage block was
recently defined by surface geology including approximately 200 miles of
reprocessed 2D seismic data, gravity and aeromagnetic data, and
approximately 1,200 surface soil geochemical samples. Seismic data
reprocessing and interpretation indicates that the Keystone Prospect has
some of the largest structure closures mapped to date within the Central
The Keystone prospect is located near the axis of the 55 mile-long Wasatch
Monocline in Sanpete County, Utah and contains several four-way closed
structures and/or combination fault trap structures. The Jurassic Twin
Creek Limestone and the Jurassic Navajo Sandstone will be the primary
reservoir objectives and the Cretaceous Ferron Sandstone and the Cretaceous
Dakota Sandstone will be the secondary objectives. Drilling on the Keystone
prospect could begin in the first quarter of 2008.
Royalite is a publicly traded oil and gas company exploring the newly
discovered central Utah Hingeline trend. Royalite currently owns a 100%
working interest (87.5% NRI) in over 67,000 net acres in the trend.
This Press Release may contain, in addition to historical information,
forward-looking statements. These forward-looking statements are based on
management's expectations and beliefs, and may involve known and unknown
risks and uncertainties and other factors that may cause the actual results
to be materially different from the results implied herein. In particular
there is no assurance that Royalite will exercise the option. Royalite does
not currently have the funding in place to close this transaction and will
not be able to exercise the option without adequate future funding. There
is no assurance that Royalite will be successful in raising funding to
close the purchase of the properties or drill any exploratory wells.
Readers are cautioned not to place undue reliance on the forward-looking
statements made in this Press Release.