Alberta Star to Participate in Canadian Heavy Oil Wells
Alberta Star Development has entered into a sub-participation agreement with Arctic Hunter. Under the agreement, Arctic Hunter has agreed to participate with Alberta Star in the two test wells by October 31, 2010. Alberta Star holds a 50% working interest in the Landrose, Saskatchewan assets which form part of the heavy oil assets acquired by Alberta Star on August 6, 2010 from Western Plains. Under the agreement, Arctic Hunter must pay 100% of Alberta Star's share of the cost to drill, complete and equip or abandon the test wells to earn a (50% net) before payout (BPO), reserving to Alberta Star a convertible overriding royalty of 10% until payout. After payout, Alberta Star has the option to either convert the gross overriding royalty to a 50% working interest (25% net) in the two test well spacing units or remain in a gross overriding royalty position. Arctic Hunter has no option to drill post-earning wells under the sub-participation agreement. Both test wells are vertical wells and are expected to be drilled, cased and completed on or before October 31, 2010. Western Plains Petroleum Ltd. will be the operator of the test wells.
The two test wells (C-11, C-14) form part of the Company's previously announced in-fill drilling program located on section 6-50-25 W3M in Landrose, Saskatchewan. Drilling completion and equipping costs are expected to average $400,000 per well ($200,000 net to Arctic Hunter). The locations of the two (2) in-fill wells are adjacent to the Company's successful C12-06-50-25 W3M well which was drilled and completed in July 2010 in accordance with a farm-out with Arctic Hunter. The C-12 well is currently producing approximately 80bbls/d gross of heavy oil (4 bbls/d net BPO and 20 bbls/d net APO to the Company).