The contract is in place with a natural gas pipeline subsidiary of transmission company, DCP Midstream, and allows for the sales of the company’s natural gas in Bastrop.
South Texas Oil said that, at approximately 1,500 British thermal units per cubic feet, Bastrop Field associated gas is high-BTU and liquids-rich, allowing for further revenue by stripping the liquids from the natural gas.
South Texas Oil will begin to sell initial volumes of 150 thousand cubic feet per day (Mcf/d) of natural gas to 200Mcf/d prior to July 31, 2008, according to the agreement. As part of the contract terms, South Texas Oil is responsible for $186,000 of capital investment in the project, for which it will receive a repayment over time if 220,000Mcf of gas is produced within two years of first sales at $0.25/Mcf.
The company said that there are no minimum volume commitments and as gas volumes increase, the infrastructure will be improved to meet the field’s throughput requirements.
