Donnycreek Energy has exercised its option and concluded the purchase of certain petroleum and natural gas rights from Donnybrook Energy Inc. for a purchase price of approximately $2.3 million.

The option was granted to Donnycreek pursuant to the arrangement agreement made as of October 3, 2011 and in connection with the previously concluded plan of arrangement (the "Arrangement") involving the companies which closed on November 4, 2011.

The Purchased Assets are comprised of 9 gross sections of lands prospective for Montney liquid rich resource development in the Kakwa area of Alberta acquired by Donnybrook from September 1, 2011 to November 4, 2011 which are within 8 kilometres (5 miles) of the assets conveyed to Donnycreek by Donnybrook on November 4, 2011 pursuant to the Arrangement.

Kakwa Area, Alberta

Donnycreek also reports that the first horizontal Montney location, Kakwa Hz 13-17-63-5 W6M, is expected to spud early next week with the objective of drilling horizontally through the Montney formation to a total measured depth of 5,150 metres.

Donnycreek's partners in the 16 sections have committed to drilling the Kakwa Hz 13-17 Montney well with Donnycreek paying 25% of the horizontal well costs (drill and complete) to hold a 25% working interest and 10% GORR on 75% before payout and a 50% working interest after payout in the well. Donnycreek will also hold a 50% working interest in the balance of the 16 section block.

The Kakwa acreage was acquired following a detailed technical assessment of the region that included a petrophysical evaluation of pre-existing wells and the mapping of gas in place across what Donnycreek believes to be a localized area characterized by superior liquids-rich gas potential. The results from two Montney wells recently announced by competitors, both of which are located less than 14 kilometres (9 miles) from the Donnycreek lands, demonstrate exceptional deliverability from the Upper Montney, with reported rates of 4.7 MMscf/d with 1,200 bbl/d condensate and 15.8 MMscf/d with 1,000 bbls/d of condensate, respectively. Donnycreek considers the play to have been significantly de-risked through the operations of competitors active in the area and notes that these companies have continued to acquire petroleum and natural gas rights on lands surrounding Donnycreek's acreage.

Based on its petrophysical evaluation, mapping and technical review of producing wells in the area, Donnycreek has identified what it considers to be a thick hydrocarbon-charged zone throughout the 100m Upper Montney interval, which zone Donnycreek believes will be conducive for development using stacked horizontal wells. Donnycreek intends to target the lowermost portion of the Upper Montney with its first well. Based on current industry practices, development of the entire acreage could require up to 64 gross wells, with the possibility that additional laterals per well could be required to access the entire hydrocarbon-bearing section.

The Kakwa property is accessible for field operations year-round and is located within 6 kilometres (4 miles) of a major, midstream operated, natural gas and NGL processing facility.

Tags: Donnycreek Energy