The Farm-in Agreement calls for Magnum to pay 100% of the drilling costs to earn a 50% working interest in drill space units as detailed in the Farm-in Agreement. Before payout, Magnum will receive 100% of the production and shall pay the Farmor a 15% gross overriding royalty. Following payout, the Farmor will have the option to convert its royalty to a 50% working interest.
Concurrently, Magnum has entered into a joint venture arrangement with Mont Blanc Resources Inc. with respect to 50% of the above-mentioned Farm-in Agreement (the "Mont Blanc JV"). Pursuant to the terms of the Mont Blanc JV, Mont Blanc has agreed to pay 55% of Magnum's drilling costs pursuant to the Farmin Agreement where after Mont Blanc will earn 50% of Magnum's interest in the Farm-in Agreement properties. Following the effect of both the Farm-in Agreement and Mont Blanc Joint Venture, Magnum will pay 45% of the drilling costs to earn a 25% working interest in the properties.
The properties were acquired by the Farmor along with proprietary 2D and 3D seismic data and drilling is expected to commence before March 1st, 2006. Upon initial success, further drilling opportunities, utilizing production and seismic data, will be explored.
Jens Biertumpel, President, Chief Executive Officer of Mont Blanc is also a director of Magnum. Also, Michael Smith, a director and control person of the Farmor, is also a director of Magnum.
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