Grey Creek will grant to Transeuro the option (the "Farm-in Option") to acquire a 97.5% legal and beneficial interest in the Licenses. The Farm-in Option may be exercised by Transeuro by expending, on behalf of Grey Creek, all of Grey Creek's remaining work expenditure obligations as set out in each of the respective Licenses and by taking all steps necessary to maintain the Licenses in good standing (collectively, the "Farm-in Expenditures"). The Farm-in Expenditures of US$2,200,000 will be incurred by November 2006 in accordance with and at the times required by the terms and conditions of the Licenses. Transeuro will issue 600,000 common shares to Grey Creek as consideration for the Farm-in Option. Grey Creek will also grant to Transeuro an additional option (the "Final Option") to acquire the remaining 2.5% legal and beneficial interest in the Licenses. The Final Option may be exercised by Transeuro by paying the sum of $1.00 to GreyCreek at any time following October 2006 provided that Transeuro has paid the Farm-in Expenditures. In addition the Company will pay a finders fee of 45,000 common shares. The common shares will be subject to a minimum four month hold period.
Prospecting License 257 covers an area of approximately 1,700,000 acres in the Cape Vogel Basin area of Papua New Guinea. Prospecting License 258 covers an area of approximately 1,000,000 acres in the North Niugini Basin of the Sepik area of Papua New Guinea. Including the previously announced Prospecting License acquisitions in Papua New Guinea (see News Release dated February 11, 2005), Transeuro now controls over 4,240,000 million acres in Papua New Guinea where other operators have reserves in place totaling 15 trillion cubic feet of natural gas and present daily production of approximately 50,000 barrels of sweet crude.
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