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SALT LAKE CITY (AP) -- Two more oil companies are teaming up to drill for oil in central Utah, a region that long frustrated exploration until a tiny Michigan outfit made a spectacular wildcat strike in 2003.
Delta Petroleum Corp. announced Wednesday that it would pay another Denver company, Armstrong Resources LLC, $24 million in cash and 673,000 shares of stock for an interest in Armstrong's holdings in central Utah.
Delta said it would take a 65 percent stake in Armstrong's 88,000 acres of leased land and that it would cover the full cost of drilling the first three wells by summer in the so-called Hingeline play.
That complex geologic feature has paid off handsomely for Grand Rapids, Mich.-based Wolverine Gas & Oil Corp., which is pumping oil as fast as it can from wells near Sigurd, Utah, and believes it has tapped into a system of major oil deposits.
Delta planned to raise financing by offering up to 1.5 million shares of stock for sale.
In an interview, Roger A. Parker, Delta Petroleum's chairman and chief executive, said Wolverine's Covenant field opened a new oil frontier that could contain more than 1 billion barrels of untapped oil across a mountainous region about 65 miles long and 20 miles wide.
Delta will sink its first wells immediately south of the Covenant field, said Parker, who called Wolverine's find one of the largest onshore discoveries in decades and a sign that other deposits as large or larger can be found nearby.
"The field's shallow depth, thick pay section and high production rates make for exceptionally good economics," Parker added in a statement. "This transaction gives Delta significant exposure to one of the most exciting plays in the United States."
Wolverine also continues to search on its own, having snapped up leasing rights to about 600,000 acres of private and government land before the secret got out. Its discovery set off bidding wars at government leasing auctions as others look to gain a foothold in the area.
Among those are Ansbro Petroleum Co. of Denver and Cleary Petroleum Corp. of Oklahoma City. Citing Wolverine's discovery, both companies have told The Associated Press they planned to dust off old prospects on land they secured years earlier for drilling.
Delta said "thrust belt" discoveries such as the one Wolverine tapped into tend to produce other large deposits. The company said it had identified numerous geologic traps that could contain more oil.
The trick is finding the oil amid folds and thrust faults. Geologists liken the Jurassic sandstone layers under central Utah to overlapping cafeteria trays jammed by a conveyor belt. In many places the upheaval forced layers of older sediments dozens of miles over younger rock.
Delta's partner is Bill Armstrong, president of Armstrong Oil & Gas Inc. of Denver, who formed Armstrong Resources LLC for the joint venture. He wasn't immediately available for comment.
(Copyright 2006 by The Associated Press. All Rights Reserved.)
