Montana Exploration Corp. Announces US$20 Million Strategic Development Agreement for the Company's Montana Oil and Gas Prospects

CALGARY, Feb. 23, 2017 /CNW/ - Montana Exploration Corp. ("Montana Exploration" or the "Company") (TSXV: MTZ) today announced that it has entered into an agreement (the "Farm-out Agreement") with a private US-based family office group (the "Farmee") pursuant to which the Farmee will fund up to US$20 million in drilling costs in the Company's Montana oil and gas prospects (the "Participation"). 

Farm-out Agreement

Funds committed by the Farmee under the Farm-out Agreement will be applied primarily to drill new wells following up on the success of the Company's recently completed five well Shaunavon oil drilling program with Rioco Ltd. and to meet Montana Exploration's commitment to drill 10 wells (including a minimum of six gas wells) on the Company's farm-in acreage with a large Montana-based utility (the "Utility").  Pursuant to the terms of the Farm-out Agreement, the Farmee has committed a minimum of US$5 million for the first stage of a potential four stage drilling program. US$5 million must be invested by the Farmee in each stage to earn 12.5% of the Company's pre-farmout working interests, excluding wells drilled and facilities in place at the effective date of the Participation, and subject to the rights of the Utility and the farm-in rights of Rioco Ltd..  Determined on a drilled well by well basis, the Farmee will earn 100% of Montana Exploration's net interest prior to payout and 50% after payout, subject to Montana Exploration's right to participate for 25% of its original net interest in each well. Montana Exploration will be the operator subject to the direction of a joint operating committee of Montana Exploration and the Farmee.

The obligations of Montana Exploration and the Farmee under the Farm-out Agreement are subject to the approval of the TSX Venture Exchange and all other third party or regulatory approvals as may be required. 

Montana Exploration has now identified 36 Shaunavon oil prospects and 23 gas prospects (on seven potential horizons excluding potential in the shallow Eagle and Judith River formations) on over almost 400,000 acres of land held by Montana directly and through its farm-in with the Utility based upon partial interpretation of 315 square miles of 3D seismic.  Proposed targets for the new drilling program with the Farmee may include up to 50 new wells with the objective of developing reserves and production associated with the Company's recent drilling success, pursuing look-a-like oil objectives and drilling new gas targets. 

The economics of the Company's proposed drilling program with the Farmee for both gas and oil are compelling.  The last five wells were drilled and cased in the Shaunavon at an average depth of 4,000 feet for an average cost of US$375,000.  The completed and equipped cost of the new oil wells averaged under US$475,000.  The wells are projected to pay out in less than one year.  Through economies of scale, Montana Exploration expects to significantly improve upon present net revenues to the Company of $28 per barrel for an average 20 API crude after transportation costs, royalties, quality adjustments and field operating costs.  Montana Exploration has reviewed the production histories of substantially all of the Shaunavon oil wells in the region.  Initial type curve production for average stimulated Upper Shaunavon wells in the region is between 35 and 70 bopd and "estimated ultimate recoveries" per well are expected to be between 100,000 and 180,000 bbls.

"The Farm-out Agreement represents a significant step in the Company's ongoing financing and development plan, bringing in quality partners and significant new capital that will primarily go into the ground to enhance the value and cash flow of the Company while minimizing dilution to existing shareholders," said Charles V. Selby, Chairman and Chief Executive Officer.

Recent Drilling Results

Montana has now initiated oil production on two of the wells drilled in the recent five well conventional vertical drilling program with Rioco Ltd. at a combined initial gross rate of approximately 130 bopd without acid stimulation.  A third well is expected to be completed as an oil well in the near future and a fourth well is expected to be completed as a gas well in conjunction with a proposed program to bring some of the Company's shut-in gas production back into production.  The Company's recent drilling results are significant in that Montana Exploration has now drilled four oil wells over an area including four townships (144 square miles) encountering 100% oil and no observed oil water contacts to date in the prospects drilled in the Upper Shaunavon.  Montana Exploration is using a conservative approach to completion and production procedures to confirm the pervasiveness of oil in the Upper Shaunavon and budgeted low costs of drilling and operations. 

ABOUT MONTANA EXPLORATION CORP.

Montana Exploration Corp. is an oil and gas exploration and production company focusing on the Shaunavon oil and Eagle gas opportunities underlying its extensive land holdings and drilling rights in the State of Montana. In the United States, the company operates through its wholly-owned subsidiary, Montana Land & Exploration, Inc. The Company's common shares are listed on the TSX Venture Exchange under the trading symbol "MTZ". Additional information regarding the company is available at www.SEDAR.com or at www.MontanaExplorationCorp.com.

Resources
There is no certainty that any portion of the resources referenced in this press release will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion  of the resources.

Forward-looking Statements
This press release contains statements that constitute "forward-looking information" or "forward-looking" statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", believe", "expect", "plan", "intend", "forecast", "target", "project",  guidance", "may", "will", "should" "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook.

This press release contains forward-looking information including, but not being limited to the number of wells to be drilled under the Farm-out Agreement, the total drilling program cost, the estimated costs of wells drilled under the Participation, the projected payout term for existing wells and the economics of the Company's oil prospects and current production generally.  Statements referring to reserves or resources are by their very nature forward-looking information. Statements in this press release relating to reserves and resources involve the implied assessment, based on certain estimates and assumptions that the described reserves and resources, as the case may be, exist in the quantities predicted or estimated, and can be profitably produced in the future. There is no certainty that it will be commercially viable to produce any portion of such prospective resources. Other assumptions and qualifications relating to drilling schedules, costs and other matters are inherent in these estimates.

Forward-looking statements and information contained in this press release are based on our current beliefs as well as assumptions made by, and information currently available to, us. Although we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect.

By their very nature, the forward-looking statements included in this press release involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements.

Furthermore, the forward- looking statements contained in this press release are made as of the date of this document and we do not undertake any obligation to update publicly or to revise any of the included forward- looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.                                       

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Montana Exploration Corp.