RIVERTON, Wyo., Aug. 26, 2009 (GLOBE NEWSWIRE) -- U.S. Energy Corp. (Nasdaq:USEG) ("USE" or the "Company"), a natural resources exploration and development company with interests in molybdenum, oil and gas, geothermal, and real estate assets, today announced that it has entered into a Drilling Participation Agreement (DPA) with Brigham Exploration Company (Nasdaq:BEXP) ("Brigham") to earn working interests in up to fifteen 1,280 acre spacing units in Brigham's Rough Rider project area located in Williams and McKenzie Counties of North Dakota. The terms of the DPA call for the drilling of up to 15 initial Bakken wells in 15 separate 1,280 acre spacing units. The ultimate number of wells to be drilled in the units could reach 90.
Under the terms of the DPA, USE has committed to drilling six initial wells (and earning subsequent working interests in six 1,280 acre spacing units) and will have the option to commit to drilling four additional wells (and earning subsequent working interests in four additional 1,280 acre spacing units) after receiving notification of the initial production (IP) rates from four of the first six initial wells drilled. If USE elects to drill the four additional wells, it will then have an option to participate and earn working interests in five additional wells and 1,280 acre spacing units after receiving notification of the IP for the fifth and sixth initial wells drilled in the first six well program. Upon the drilling and completion of the first or initial well in each 1,280 acre spacing unit, USE will earn 36% of Brigham's original working interest in the remaining acreage (or drilling locations) in each 1,280 acre unit. If USE participates in the drilling of the initial wells in all fifteen 1,280 acre spacing units, it will earn working interests in 19,200 gross acres in the Rough Rider project area.
USE has agreed to participate for 65% of Brigham's original working interest in each initial well drilled in the first six well program. Upon receiving a pooled payout of all of the costs and expenses incurred to drill and complete the six initial wells in the six initial 1,280 acre spacing units, USE will assign back 35% of its 65% of Brigham's original working interest in the first well in each 1,280 acre spacing unit to Brigham. Following that, USE will own 42.25% of Brigham's original working interest in the initial well in each 1,280 acre spacing unit. If USE elects to participate in the second group of four wells and spacing units, it will also be entitled to a pooled payout similar to the first six well program. If USE elects to participate in the third group of five wells and spacing units, it will be entitled to an initial well by initial well per spacing unit payout before a 27.7% back in assignment to Brigham.
The drilling of the first two wells in the first group of six wells has already been commenced by Brigham. The Brad Olson 9-16 #1H is located in Williams County, North Dakota, approximately one-half mile to the west of the successful Olson 10-15 #1H well completed by Brigham in February 2009. The Olson 10-15 #1H well came in at an early 24 hour IP rate of 1433 BOE per day. Similar to the Olson 10-15 #1H well, the Brad Olson 9-16 #1H is a long lateral well that has already reached a total measured depth of 20,500 feet. Brigham is now in the process of completing the well utilizing 28 frac stages at intervals of 400 feet. USE anticipates reporting an IP for the Brad Olson 9-16 #1H well in late September.
The BCD Farms 16-21 #1H well is now drilling forward at a vertical depth of 2,500 feet. It is also located in Williams County, North Dakota and it too will be a long lateral well (approximately 10,700 feet total vertical depth with a 9,100 foot horizontal lateral). Brigham anticipates that the BCD Farms 16-21 #1H well will reach total measured depth by late September and also plans to complete the well with 28 frac stages. Both the Brad Olson 9-16 #1H and BCD Farms 16-21 #1H wells are targeting the Middle Bakken formation.
