Each of the eight wells at Highlands’ East Denver Project are now producing, which is anticipated to provide robust revenue to the Company in 2019 and beyond.
Highlands has a 7.5% carried interest in all current and future wells, following its third-party financing agreement. The Company’s partner, True Oil LLC (“True Oil”) assumed all capital costs and operational responsibilities.
With the operations of the project passed to True Oil, Highlands has been able to reduce its own overheads and operational expenditure costs. Just as importantly, and as described below, we have been able to dedicate additional time and resources to acquire and develop new projects which, in time, may deliver further upside to our shareholders.
The project’s full development potential is 24 wells in total, all of which, if our partners elect to proceed with them, would be developed at no cost to Highlands. The cash flows that could be received by the Company through our 7.5% revenue share could be significant in the future.
Furthermore, Highlands continue to explore avenues to expand the project further. We have maintained strong relationships with prominent oil & gas companies in the area and we periodically assess suitable farm-in opportunities in nearby locations. This needs to be set in context – there is no guarantee that we will secure such opportunities or that they can be delivered on terms that we consider to be acceptable. However, our expectation would be that any expansion of our East Denver Project will fall within the terms of the existing Acquisition and Development Agreement. In other words, development would be funded by our current partners and we would maintain a 7.5% revenue share.