First Star has agreed to purchase the property for US$1,500,000 under payment terms as follows: First Star will pay to an initial deposit of US$150,000 upon signing the letter of intent followed by a second deposit of US$150,000 to be paid on or before January 10, 2007 and a third deposit of US$450,000 on or before February 1, 2007. Upon payment of the first US$750,000 on or before February 1, 2007, the First Star will have acquired a 50% interest in the property. The balance of the Purchase Price, being US$750,000 will be paid by First Star to the Vendor on or before May 30, 2007 completing 100% of the purchase. First Star has the option to become the operator upon completing the purchase.
This offer is subject to the First Star and Big Snowy entering into a mutually acceptable formal purchase and sale agreement on or before February 1, 2007 and is subject to TSX-V approval.
First Star initially acquired a 50% working interest in five wells to be drilled in the Mosser Dome and Blue Ridge fields, located in Yellowstone County, Montana. To date, three wells have been completed and tied into the gathering system. The field is currently producing 50 barrels per day exclusively from the Greybull formation at approximately 1,000 feet in depth.
The Mosser Dome field is located around 15 miles southwest of Billings, Montana and has produced over 500,000 barrels of oil since it was discovered in 1936. The Greybull formation has an average net pay thickness of 28' in the field area. The Greybull sandstone was deposited by a large meandering stream on an alluvial plain. The average porosity of the sand is 25% with permeability of about 2 Darcys. Previous wells in the area have produced from 20 to 100 barrels per day of 22 degrees API crude. The Mosser Dome appears to be essentially a faulted half-dome. The closing fault is a north-northeast trending normal fault which branches off of the Fromberg fault to the south.
Other potential formations on the property include the Muddy and the Basal sands. Previous wells drilled to the Greybull formation encountered the Muddy formation at 650 feet and the Basal formation at 880 feet. The Muddy has approximately 10 feet of net sand with oil shows and porosity of over 20% but low permeability. The Basal sand occurs at approximately 880 feet with oil shows as well. Both of these formations have not been developed in this area.
First Star President Bill Wishart states, "We are enthusiastic about the prospects this property presents to the Company. Since our first involvement in January 2006, which has included the drilling of three development wells, we have been impressed by the property's current and future potential. The property provides immediate stable oil revenue plus much undeveloped and unexploited potential."
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