The LOI provides for Exxel's wholly owned Subsidiary Exxel Energy USA Inc. to pay approximately US$21,500,000, subject to certain adjustments, to EnCana to acquire an undivided twenty percent (20%) working interest in leases in approximately 375,000 gross (75,000 net) acres in the CRB, including a 20% working interest in the Brown 7-24 well.
Exxel USA and EnCana are attempting to negotiate a formal and definitive binding acquisition and exploration agreement ("AEA") regarding the purchase and sale of the assets over the next several weeks. It is anticipated that the AEA will be subject to Exxel USA raising sufficient funds to effect the completion of the transaction. Additionally, the final AEA will be subject to approval of the board of directors of Exxel and Exxel USA, and Exxel obtaining all required regulatory approvals including that of the TSX Venture Exchange.
Exxel entered into the LOI and intends to complete the transaction based on the following rationale:
- Transaction includes leases in the CRB, primarily centered around the key past (Yakima 1-33, BN 1-9) and current (Anderville Farms #1, Anderson 11-5 and Brown 7-24) drilling activity in the basin
- Undivided working interest owner in the Leases
- Participation in the Brown 7-24 well (20% working interest), currently drilling and past the base of basalt
- Ability to participate on an unpromoted basis in current and future exploration and development of acreage covered by the Leases within the CRB, including the Yakima Fold Belt, Saddle Mountain and Hog Ranch High
- Transaction would position the Company as the leading junior exploration and production company in the CRB (all in the state of Washington) with a total interest of over 700,000 gross (425,000 net) acres in this emerging natural gas play
Exxel cautions that since the LOI does not constitute a binding agreement and neither of the parties is currently committed to any definitive agreement and the LOI does not give rise to any binding obligations, except for confidentiality provisions, the acquisition may not be completed. Furthermore, any party may terminate negotiations at any time without any obligation or liability whatsoever.
Cliff Adams, CEO of Exxel, commented, "We are very excited about this opportunity to expand our position in this highly prospective basin. Our due diligence regarding the wells that have been drilled to date and the Brown well, which is currently drilling, confirms our geologic model of the basin. This transaction gives Exxel the opportunity to take advantage of the knowledge gained from the first two wells and to purchase an interest in the Brown well, which is currently drilling past the basalt and in the sedimentary section. With the drilling data gained through our due diligence and our current geologic model and expertise, Exxel management believes it has a knowledge base and acreage position to take advantage of many different prospect play concepts."
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