ZaZa Energy Corp. (Nasdaq: ZAZA) signed a second amendment and first restatement of joint exploration and development agreement with its current joint venture partner to further develop and expand its Eaglebine/Eagle Ford East assets.
According to the release, ZaZa's joint venture partner is one of the largest independent crude oil and natural gas companies in the U.S.
- Acceleration of Phase II. ZaZa’s joint venture partner has elected into Phase II ahead of the schedule set forth in the original agreement. As consideration for the Phase II election, ZaZa will receive (i) $17 million in cash consideration and (ii) interests in 15 of its venture partner’s wells outside of the area of mutual interest line in Madison County with a PDP present value of $3 million based on an independent reserves report. In addition to the preceding, ZaZa will receive 100% carry consideration for one vertical well completion, two horizontal well completions and a $1.25 million credit towards miscellaneous land or operational expenses. In return, ZaZa will assign to its joint venture partner 20,000 net Phase II acres. The company also continues to anticipate timely drilling and completion of three carried Phase I obligation wells.
- Acceleration of Phase III. As consideration for the assignment of at least 6,000 net former Phase III acres, ZaZa will receive additional interests in the Southern Madison wells with an incremental PDP present value of $9 million based on an independent reserves report. Pro forma for this transaction, ZaZa will retain 14,000 net Phase III acres, and its joint venture partner has the option to elect into some or all of this acreage on or before Jan. 31, 2014, by making a further cash payment to ZaZa. The original agreement called for a Phase III election by Jan. 31, 2015.
- Acreage and Production Exchange. The company’s joint venture partner will assign to ZaZa (i) a 25% working interest in 19,000 net additional acres recently acquired by its venture partner in the agreement’s area of mutual interest and (ii) related area of mutual interests in multiple producing wells with a PDP present value of $4.1 million. The company also expects additional production in the near future from two recently drilled wells, in various stages of completion, within this newly assigned acreage. In return for the 25% working interest and immediately available production, ZaZa will pay $2 million and assign a 75% working interest in 18,500 net acres of its retained acreage position in Walker and Madison Counties, Texas.
“This is a significant step forward for our company as we establish our production base and create the right platform for growth. Through this transaction we’ve successfully increased our contiguous JV acreage footprint, established $16.1 million in PDP value across interests in 23 producing wells and will see an influx of $16.5 million in net cash. I look forward to providing investors with operational updates as the joint venture progresses,” Todd A. Brooks, ZaZa’s president and CEO, said in the release.
ZaZa Energy Corp. focuses on the exploration and development of unconventional oil and gas resources in the U.S. The company is based in Houston.