Under the terms of the agreement, Zargon will drill two wells on or before April 18, 2004 with an option to drill an additional three wells on or before April 18, 2005. By drilling all five wells Zargon will earn a 50 percent interest in K2's lands within the Triangle Zone prospect area covering K2's rights to approximately 58,000 tribal mineral acres and up to approximately 20,000 non-tribal mineral acres. In addition, if Zargon completes its commitments, the two companies will have an area of mutual interest over lands that include up to 75,000 non-tribal mineral acres within the prospect area. The initial two wells to be drilled in the Triangle Zone prospect area are targeting Thrusted Virgelle sandstone formations at an approximate depth of 3600 feet and Thrusted Horsethief sandstone formations at a projected depth of 2450 feet. In addition, Zargon has the option to proceed with certain completion operations on several suspended gas wells previously drilled by K2 including Osprey No. 1, Osprey No. 3, Middle Fork No. 2, and Merlin No. 2 to evaluate gas shows in the Virgelle, Two Medicine, and Horsethief sandstones.
David Young, K2's President & CEO stated, "This is the first concrete result of the strategy we laid out in our 3rd quarter report, to enter into joint ventures with well established oil and gas companies. Zargon's proven record of success makes them an ideal partner. We continue to pursue and evaluate further opportunities on K2's property in Montana, always focusing on increasing value for K2 shareholders and the Blackfeet Nation."
K2 also announces that it is planning to drill two wells within its Bow Island prospect area and one well into the seismically imaged Horsethief sands within its Central Block acreage, with all three wells to be completed by April 18, 2004.
Drilling of the above wells is scheduled to commence in March 2004 following finalization of regulatory approvals.
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