On 1st October 2008, CAP Energy Ltd (CAP) declared that its wholly-owned US subsidiary, CAP Energy USA, Inc. (CAPUSA) had agreed to acquire an interest in the Starks Dome oilfield in southern Louisiana from CSV Holdings, Inc. (CSV), subject to contract and final due diligence. The assets being acquired comprise a 25% working interest in seven producing oil wells and three new wells shortly to be completed for production, plus the right to participate at base cost in any new wells to be drilled on CSV's lease.

Prior to contract completion, CAPUSA has completed its programme of due diligence, and with CSV has been involved in negotiation of final terms and preparation of contract documents.

CAPUSA has also used this time to reassess the valuations used in the initial heads of agreement in view of the recent decrease in the price of oil. Consequently, while it has been agreed to keep to the agreed purchase price (US$1 million), two further assets are being included at no further cost to CAPUSA, giving access to substantial further reserves at Starks Dome plus the possibility of achieving high volume oil and gas production in another area already proven productive. These additional assets are as follows:

1. The right to participate in the recompletion of up to forty existing wells in the Starks Dome Field which are not included in the original agreement but which contain unproduced oil reserves in the upper zones of the wells. CAPUSA will contribute its agreed share of the completion costs and existing equipment in exchange for a 25% working interest in the wells. The wells will be very low cost compared with new wells and can deliver very good returns even at current oil prices. Completely new wells will be drilled only when economics justify the expense.

2. The right to participate in the recompletion of a productive well drilled on the Iberia Dome structure in southern Louisiana. Wells in this area have been extremely productive, and this well tested oil and gas in commercial quantities before it was capped and temporarily abandoned and then acquired by CSV. CSV now plans to test an untested zone above the previous tested zones. If commercial production is established from this well as anticipated, further field development is planned. CAPUSA will earn a 10% share of CSV's interest, with much of the cost success- based. While this project has a higher risk profile than the Starks Dome project, there is a real possibility of achieving rates of production many times higher of both oil and gas. The Iberia Dome Field has already produced large quantities of oil and gas, so pipeline facilities are already in place.

Initially CAP had planned a share placing to finance the final stage of the acquisition and the short term field development costs. As a result of the recent events on world money markets, it is now planned to offer two alternatives, for completion in January, 2009:

Tags: CAP Energy Ltd