Bakken/Three Forks Shale oil

On 22 February, 2012, Emerald’s USA subsidiary Emerald Oil & Gas USA Inc executed a Purchase Agreement with North Plains Energy LLC, to acquire approximately 10,500 net lease acres, including a 7.5% WI in a producing Middle Bakken oil well located on the acreage. This provides Emerald with immediate
access to oil production, an active non-operated drilling program and a substantial acreage holding in highly prospective lease areas adjacent to proven, producing Bakken and Three Forks areas.

These areas are prospective for oil in both Middle Bakken and Three Forks formations. Public well permitting information shows the dominant operators near these three areas to be expanding their drilling activity from nearby proved, producing areas toward our newly acquired leases.  The Central and Southwest areas are immediately adjacent to proved Middle Bakken and Three Forks fields with offsetting producing wells.

Emerald's US subsidiary is currently building  operating capability for a Bakken development drilling program planned to commence end 2012 or early 2013. As part of the acquisition Emerald entered a Transition Services Agreement with North Plains Energy, under which North Plains will provide operating support during 2012, up to and including contract drilling of initial wells on behalf of Emerald.

Emerald holds interests in 45 drilling spacing units (DSUs) of 1,280 acres in Dunn County and expects to operate approximately 14 DSUs holding approximately 66% of its net acreage. Emerald's working interests in individual DSUs varies between 1.5% and 75% for a total of 8 net DSUs.  Each 1,280 ac DSU can potentially be drilled out with up to 4 middle Bakken wells and 3 Three Forks wells per DSU, for a total of 7 development wells per DSU. 

The Company's non-operated DSUs in Dunn County are operated by large, experienced US shale operators such as Hunt, Hess, Marathon, Oxy and others and the Company expects to participate in a number of non-operated wells during 2012 and beyond.

The combination of operated and non-operated drilling programs provides Emerald with the ability to control the drilling program on the majority of its net acreage, while benefiting from the experience of some of the most seasoned operators in Williston Basin.