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Fosterton Project, Saskatchewan The Company entered into an agreement allowing it to drill a test well on a Crown Lease (“the Lease”) in the Fosterton Area of Saskatchewan. After completing a well, the Company will have earned a 100% interest in the production spacing unit for the test well and 65% interest in the remainder of the Lease. The 100% interest will be subject to convertible gross overriding royalties of 5% to 15% on oil and 15% on gas. The Company then entered into participation agreements which entitle the participants to earn various interests in the Lease by paying a total of 65% of the drilling costs. Upon completion of the test well, the Company’s interest in the production spacing unit will be reduced to 35% before well payout and 26% after well payout and to 26% in the remainder of the Lease. The first well on the project was drilled in February, 2006 and put on production in August, 2006. The well flowed but was marginally economic. In March 2007, the Company installed new pump equipment on the well and the well is producing approximately 50 barrels of oil per day (17 barrels per day) net to the Company.
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