Nighthawk Energy ups interest in Jolly Ranch Project

Nighthawk Energy (HAWK) announced that it was to acquire another 25% working interest in Running Foxes Petroleum’s (RFP) Jolly Ranch Project in the Denver-Julesburg Basin, Colorado for an initial consideration of $12.5 million.

The acquisition, which is expected to occur on 23 January, will see Nighthawk hold a 75% working interest in the Jolly Ranch Project. Nighthawk has been informed that RFP has entered into exclusive discussions with a third party to sell the remaining 25% in the Jolly Ranch Project by 30 April 2012.

The consideration of $12.5 million is to be paid in $8.5 million in cash and $4 million in new ordinary shares in the company. The oil development and production company is to issue 10 million zero coupon unsecured loan notes to raise £10 million. Additionally, it is planning to raise up to £4.15 million in an open offer.

In the event that Nighthawk sells its working interest in Jolly Ranch within five years, it will pay RFP a portion of the cash proceeds, or the fair market value for any non-cash proceeds which it receives, up to a maximum of US$5 million.

In return, RFP has pledged that "subject to certain exceptions, it will not sell or otherwise dispose of, or agree to dispose of the shares for a period of 12 months following completion". Additionally, RFP has also agreed marketing provisions for a further 12 months.

Following the acquisition, Nighthawk will be in a position to control the speed and method of development at Jolly Ranch going forward, said the company. Work is expected to commence in the second quarter of 2012.

"This acquisition will propel Nighthawk to a position of majority partner and operator of a potentially major early stage US shale oil play, with funding available to press ahead with further development," said chairman Stephen Gutteridge.

In addition, in the event of a sale or disposal by the Company of all or a portion of its working interest in the Jolly Ranch Project to a third party within five years, the company will pay RFP a portion of the cash proceeds (or the fair market value for any non-cash proceeds) which it receives in connection with such sale or disposal up to a maximum aggregate amount of US$5 million.

Shares in the company fell 3% on the news.