Cougar O&G Opens Wallet for Canadian Trout Drilling Program

Cougar O&G has signed a farmout agreement to fund the Trout Drilling Program.

Under the terms of the Agreement, Zentrum Energie Trust AG ("Zentrum") will pay 100% of the costs of the first 2 well drilling program of $3.5 million Cdn to earn 90% of the net revenue before payout and 50% of the working interest in those wells after payout. Upon completion of the 2 well programs, Zentrum will earn the rights to participate in subsequent wells in the 15 well programs on similar terms.

With this funding commitment the licensing of 4 wells will be finalized, however, with the very busy drilling season currently getting underway, it is not expected that equipment will be available until 1Q/2Q 2012.

Once drilled and placed on production, pay out of each well is currently projected to be approximately 130 to 180 days if average production rates for the area are achieved. Cougar will retain operatorship of the properties and will be a 50/50 working interest partner post payout on each well drilled in this agreement. Cougar has an 85% working interest average on the balance of the properties.

Zentrum has agreed to accept secured convertible debentures of Cougar as payment of 40% of the revenue for the first two wells up to a cap of 3 million dollars. Proceeds of those debentures shall be used for working capital by Cougar.

In addition, Zentrum has also agreed to fund a 3 well work over program in the amount of $65,000 Cdn to be initiated as soon as equipment is available. This will add to the existing production level and provide incremental revenue that will be used to repay Zentrum. Under the terms of the funding agreement, $65,000 of the initial net revenue will be repaid to Zentrum and $65,000 repaid as convertible debentures as a cost of financing. Post payout, Cougar will retain 100% of the revenue.

William Tighe, CEO of Cougar provided, "We are pleased to start moving forward with our goals and with this drilling program which has the potential to add substantial reserves and value to Cougar without a dilutive common share issuance.

It was a difficult summer with little news to announce until recently when the Rainbow pipeline was actually restarted, and we could confidently make plans - the start-up was delayed several times. The very wet summer in the area, the wild fires, and the pipeline break effectively stalled or slowed down all exploration programs and operations for most of the operators in the area resulting in a very large backlog in drilling programs with services booked long into next year.

Now that operations have been returned to pre-pipeline break levels, we are moving forward. Cougar will be working with service suppliers to advance this drilling program as equipment becomes available.


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