Vaalco Energy (EGY:NYSE) closed a definitive agreement on September 6 to purchase leasing rights to 23,000 acres in Montana from Magellan Petroleum. (MPET:NASDAQ) The original letter of intent was signed on July 6, 2011. The companies later signed and closed a definitive Lease Purchase and Sale Agreement and Participation Agreement on the aforementioned date.

The property acquired resides in the Bakken formation as well as in the East Poplar Unit and the northwest Poplar field that exists in Montana's Roosevelt County, according to Energy Business Review.

Magellan Petroleum received a cash payment of $5 million once the agreement was closed. Vaalco offered to share expenses associated with drilling three wells in the Bakken formation and formations existing below it in the poplar fields. These wells are expected to cost around $15 million, the media outlet reports.

Once these projects have been completed, Vaalco will acquire a 65 percent interest in the wells existing in the poplar fields. Magellan will retain the other 35 percent interest, according to the media outlet. One well is scheduled to be drilled no later than June 1, 2012. The other two wells are scheduled to be drilled no later than December 31, 2012.