Sun River Energy, Inc. Announces East Texas Farmout Agreement With Devon Energy Production Company, L.P.

Oct 27, 2010, 08:45 ET from Sun River Energy, Inc.

DALLAS, Oct. 27 /PRNewswire-FirstCall/ -- Sun River Energy, Inc. (OTC Bulletin Board: SNRV).  Sun River Energy, Inc. (the "Company" or "Sun River") announced today that it entered into a Farmout Agreement with Devon Energy Production Company, L.P. ("Devon"), pursuant to which Devon has granted the Company the right to drill on lands subject to oil, gas and mineral leases owned by Devon.  The Farmout Agreement covers 5,700 gross acres (5,470 net acres) in the prolific Carthage Field located in Panola County, Texas.  

The terms of the Farmout Agreement call for Sun River to drill a single vertical Test Well to the Haynesville Shale geological formation on a proposed gas unit by gas unit basis.  Sun River will be required to drill a Test Well on a different proposed gas unit, approximately every 90 days.  Upon completion of each Test Well, Sun River will earn between 75% and 77.5% working interest in all leases within the gas unit being developed.  There are no additional drilling commitments once a Test Well has been drilled in a gas unit.  Devon will retain a carried working interest on the Test Well drilled in each gas unit.  Any additional wells drilled by Sun River after a Test Well in a gas unit will require Devon to participate within that gas unit on a "heads up" basis.  The Farmout Agreement required no up-front cash payment by Sun River.  

Sun River's wholly owned operating company, Sun River Operating, Inc. (Texas) will be the operator on all wells under the Farmout Agreement.

The geographical area of the farmout is adjacent to and underlies portions of Lake Murvaul in East Texas.  

In total there are approximately nine (9) potential gas units with over 89 potential drilling locations on the farmout acreage.  The primary geological targets, other than the Haynesville will be the Cotton Valley, Travis Peak and Pettit formations.  Recently drilled vertical offsetting wells demonstrate economic ultimate recoveries ("EUR") from 0.9 to 1.3 billion cubic feet equivalent ("BCFE") of natural gas with some vertical wells in the area projected to recover as high as 2.1 BCFE.  There can be no assurances, however, that the Company would achieve similar results.

Donal R. Schmidt, Jr., the Company's CEO and President, states:

"We believe the Devon Farmout provides the Company an exciting addition to our East Texas unconventional portfolio.  Our senior management and staff have significant experience in the Carthage Field dating back to 2000.  This farmout will allow us to grow our production and reserves in a very familiar environment.  

We also look forward to working with Devon as a non-operated mineral interest owner.  We anticipate successful performance as an operator under this Farmout Agreement will allow us to develop a long term relationship with Devon that will lead to other opportunities of this nature.

Based on current gas prices, one of our stated strategic corporate goals is to create a significant portfolio consisting of unconventional natural gas assets in the East Texas Basin.  We believe, this farmout combined with the acquisition of the acreage under our Purchase and Sale Agreement with Katy Resources ETX, LLC, which was announced last week, is a big step in that direction.  Upon execution of the Farmout Agreement and assuming closing of the acquisition from Katy Resources, we will have approximately 18,000 gross acres in East Texas.  We firmly believe that entry into the East Texas market with gas prices at their current levels makes a lot of sense.  Combined with what we believe is very small overall entry costs for these two deals, we are well positioned to quickly become a substantial natural gas player in East Texas.  We believe these opportunities allow us to balance our New Mexico assets in Colfax County with developmental type drilling here in Texas."

About Sun River Energy, Inc.:

Sun River Energy, Inc. is a development stage Dallas-based oil and gas exploration and production company.  For further information on the Company, please visit our website www.SunRiverEnergy.com.

Notice Regarding Forward-Looking Statements

This news release contains "forward-looking statements" (statements which are not historical facts) made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations rather than historical facts and they are indicated by words or phrases such as "anticipate," "could," "may," "might," "potential," "predict," "should," "estimate," "expect," "project," "believe," "plan," "envision," "continue," "intend," "target," "contemplate," or "will" and similar words or phrases or comparable terminology. We have based such forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, many of which are beyond our control. These factors include, but are not limited to, the time to consummate the proposed acquisition; the risk that one or more conditions to closing the proposed transaction may not be satisfied; the timing and extent of changes in market conditions and prices for natural gas and oil; the timing and extent of the Company's success in discovering, developing, producing and estimating reserves; the economic viability of, and the Company's success in drilling, the Company's ability to fund the acquisition of oil and gas assets and the Company's planned capital investments; the Company's future property acquisition or divestiture activities; increased competition; and any other factors listed in the reports the Company has filed and may file with the Securities and Exchange Commission.  Investors are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date they were made. The Company undertakes no obligation to update or revise any forward-looking statements to reflect new information or the occurrence of unanticipated events or otherwise.

SOURCE Sun River Energy, Inc.



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http://www.SunRiverEnergy.com