Ryland Oil Provides Update on Drilling Activity and Announces Adoption of Shareholder Rights Plan
Ryland Oil Corporation provide an update on its exploration activities on its 345,000 gross and net acres in SE Saskatchewan. The Company has commenced its multi-rig, 13 well drilling program which was previously announced, and is on track. In addition to continuing to explore the unconventional reservoirs targeted in previous drilling activity, Ryland has undertaken an evaluation of the Bakken formation over its entire acreage position. This program has included core sampling the Bakken objective over two widely separated areas on Ryland’s acreage and production tests in a vertical well to confirm productive characteristics of the Bakken formation. Based on this data, as part of the current program Ryland has drilled the Roncott 4-36 well as its first horizontal Bakken Middle Member well. The Roncott 4-36 is in the final stages of completion following a fracture stimulation of the horizontally drilled Bakken Middle Member. The Company is encouraged by the fluid rate and oil cut from the completion testing and is completing installation of surface facilities and preparing to put the well on pump by mid-September. Based on the initial results, an offset horizontal Bakken well, Roncott 4-1, was spudded this week approximately one mile north of the previous location. The Company has permitted 4 additional Bakken locations on the surrounding leasehold. In addition, the Company is continuing to evaluate shallower objectives in the area as part of its overall exploration program. As previously announced, Ryland intends to drill 3 more horizontal Bakken wells to further test the southeastern portion of its acreage holdings.
In addition to targeting the Bakken formation, Ryland has continued to aggressively exploit other objectives which management believes to have significant reserve potential. These objectives were evaluated in the Company’s original 5 exploration wells which were designed to confirm the hydrocarbon potential of these objectives. The first well of the current program, the Minton 7-7 well, has been drilled horizontally into one of these prospective horizons. Based on drilling shows, which included light oil on the surface from the drilling mud and significant shows in the well cuttings, casing has been set for completion of this well. Ryland anticipates the completion to commence within the week depending upon the availability of a service rig. Completion operations will consist of fracture stimulating and testing the horizontal section using multi-stage fracturing techniques.
Ryland is currently drilling for a third objective with another horizontal well (the Lake Alma 4-8 well) in the central portion of its acreage, using a second drilling rig. The horizontal leg in the objective formation is being drilled at present and the Company is encouraged by the shows which have been encountered thus far. Core samples taken from the deeper Bakken formation in this well under a stratigraphic test permit are encouraging and are undergoing full analysis.
Ryland’s drilling and exploration activity to date has further identified a fourth objective as a major focus, After coring and analyzing this unconventional gas reservoir, the Company has formulated a recompletion program on at least three of its original vertical wells drilled in the last year. This objective has yielded significant shows in all wells drilled by the Company to date including a strong gas flare during the drilling of the zone in the Minton 7-7 well. An initial limited completion attempt in the Hardy 7-9 well yielded significant gas shows but the well has been shut-in pending further regional confirmation of the potential of this objective as an unconventional gas play. This same objective has now been perforated and fractured stimulated over a larger interval in the Roncott 1-21 well and has production tested gas. The well is currently being equipped for a longer term production test. These results combined with some targeted drilling scheduled for early 2009 will provide a basis evaluating the reserve potential of this play.
Stated Richard Findley, Chairman of Ryland, “We are very pleased with our drilling results to date and expect to be in production in the near future. We are committed to building Ryland into a major oil and gas company with organic growth and we are well funded to accomplish our current program. By targeting unconventional reservoirs we are exposing Ryland to potentially large reserves of oil and gas on our extensive acreage position in one of the most active basins in North America. Management recognized at the outset that unlocking these resources could prove challenging, but we believe that our exploration strategy is prudent and will pay off for our shareholders. We are well aware of the challenges associated with current conditions in the stock market, and we want to reassure our stockholders we have not deviated from our plans and we are confident that our goals will be met.”
Ryland also announces that its board of directors has approved and adopted a shareholder rights plan (the “Rights Plan”). The Rights Plan is designed to ensure that all shareholders are treated fairly and equitably in the event of a takeover bid. A primary advantage of the Rights Plan is that it will afford shareholders sufficient time to assess potential takeover bids. It also provides Ryland’s Board with adequate time to assess unsolicited takeovers, and to allow competing bids to emerge to maximize shareholder value.
The Rights Plan will not prevent or deter takeover bids that offer fair treatment and value to all shareholders. Under the Rights Plan, one right will be issued by Ryland for each outstanding Ryland common share at the close of business on September 11, 2008 and for each Ryland common share issued in the future. The rights issued under the Rights Plan become exercisable only if a person acquires or announces its intention to acquire 20% or more of the common shares of Ryland without complying with the permitted bid provisions of the Rights Plan or without the approval of Ryland’s board of directors. Permitted bids must be made to all holders of Ryland’s common shares by way of a takeover bid circular and must be open for acceptance for a minimum of 60 days. If, at the end of 60 days, at least 50% of the outstanding common shares, other than those owned by the offeror and certain related parties, have been tendered and not withdrawn, the bidder may take up and pay for the shares but must extend the bid for a further 10 days to allow other shareholders to tender to the bid.
If a takeover bid does not meet the bid requirements of the Rights Plan, the rights will entitle shareholders, other than the offeror and certain related parties, to purchase additional common shares of Ryland at a 50% discount to the market price of the shares at the time of the takeover bid.
Ryland’s Rights Plan became effective as of September 11, 2008. The Rights Plan is subject to TSX-V acceptance and ratification of Ryland’s shareholders within six months. A copy of Ryland’s Rights Plan will be posted on SEDAR. Ryland is not adopting the Rights Plan in response to any proposal to acquire control of Ryland.
