NVS Acquires 2.35 Net Sections in Dodsland

KIRK WILSON, Clarus Securities (12/23/2010)
"Novus announced the acquisition of certain assets totaling 2.35 net sections within its greater Dodsland, Saskatchewan core operating area in exchange for total consideration of $735,000 (622,730 common shares at $1.10/share and $50,000 in cash). The company is one of the largest landholders in the area with 107.6 net sections and an estimated drilling inventory of 572 net locations identified. As of late, this area has seen increased industry focus with over 300 horizontal wells drilled in the past three years helping to derisk the play.

Based on an independent resource assessment of its Viking light oil assets completed in November 2010, internal company estimates of $1.4 million NPV10 per horizontal well, and a four-well per new section assumption, we estimate the new landholdings to add ~0.07 of value on a FDPS basis. Not a game changer, but a positive step toward value creation.

NVS intends to grow production quickly through the drill bit and, clearly, Dodsland will play a leading role with 15 net wells planned for H210. With the company's Viking program validated and its successful acquisition strategy, we believe NVS is well positioned for growth and reiterate our BUY recommendation with a $1.50 target price."

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