"This transaction represents a valuable increase in our working interests in approximately 200,000 gross acres, where we already own interests," said Andy Calerich, President of American. "As a result, we have the opportunity to increase our working interests in jointly owned areas by 20% and increase our overall acreage position by 16%, in exchange for stock representing approximately 7% of our total outstanding common shares, including the equivalent common shares underlying our convertible preferred stock."
The acquisition essentially increases American's working interests in the following Rocky Mountain based oil and gas projects:
* Working interests in the approximate 70,000 gross acre Douglas project (excluding the Fetter field project area) will increase from 75% to 90%. * Working interests in the approximate 51,000 gross acre Fetter field project area will increase from 56.25% to 67.5%, assuming the private Oklahoma based company meets their obligations under their agreement to earn a 25% interest in the area. * Working interests in the approximate 50,000 gross acre Krejci oil project will increase from 75% to 90%. * Working interests in the approximate 16,000 gross acre Bear Creek coalbed methane project will increase from 75% to 90%. * Similar working interest increases within other peripheral projects are also included in this agreement.
American and North Finn will continue their strategic relationship pursuant to which American has the right to acquire, on a proportionate cost basis with North Finn, 90% of the amount of any oil and gas project being acquired by North Finn, and North Finn has the right to acquire 10% of the amount of any oil and gas project acquired by American. This strategic relationship was originally formed when American transitioned into the business of oil and gas exploration and production in January of 2003.
American also announced that the Strock #1-20 well has been drilled through the target Parkman formation at 7,200 feet. This well did not encounter commercial quantities of oil or natural gas and was plugged and abandoned. Pat O'Brien commented, "this was a peripheral well to our focus area along the southern edge of the Powder River Basin. Although this well was unsuccessful, we earned the deep rights in approximately 5,000 additional acres, adjoining our Fetter project." American estimates its working interest share of the costs to drill the Strock #1-20 well at approximately $200,000.
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