As of October 13, 2005, the Operator is reporting that the drilling is on time and on budget.
The estimated Original Gas in Place is 1.42 Trillion Cubic Feet, which in the opinion of Management warrants the risk. The Strachan Project is based on new high-tech 3D seismic programs that are identifying deeply buried full-height and partial-height pinnacle reefs.
Turner Valley has a Farm-Out Agreement with Odin Capital on the Strachan Project and the agreement is outlined as follows:
In exchange for our paying 3.00% of all costs associated with drilling, testing and completing the test well (expected drilling cost - approx. $6.3 million Canadian to the 100% interest) on the property that is referred to as the Leduc Formation test well, we will have earned;
1) In the spacing unit for the Earning Well, a 1.500% interest in the petroleum and natural gas below the base of the Mannville excluding natural gas in the Leduc formation, and a 3.00% interest in the natural gas in the Leduc formation before payout subject to payment of an Overriding Royalty which is convertible upon payout at the Royalty Owners option to 50% of our interest.
2) A 1.200% interest in the rights below the base line of the Shunda formation in Section 10,Township 38, Range 9W5M
3) A 0.966% interest in the rights below the base of the Shunda formation in sections 15 & 16,Township 38,Range 9W5M, down to the base of the deepest formation penetrated.
The total costs are anticipated to be approximately $190,483.00 for our interest, under the terms of our agreement. This amount includes a provision for a 10% upward variation to the projected costs. All projected costs have been paid into Trust and in full, by T.V. Oil and Gas Canada Inc.
Turner Valley is very excited about the potential in the Strachan Project and will offer any advice or assistance that is required to fulfill the drilling requirements.
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