The purchase price paid for this equipment is $5,729,280. The principal rig is a truck mounted Cabot 900 with a collapsible derrick, which is capable of drilling to 11,000 feet. The other rigs, an Ideco H35 and a National T20, are capable of drilling depths of between 6500 to 7000'. The company intends to modify the H35 so that it can be used as a work-over rig.
Under the terms of the agreement, the Company issued $3,753,280 in cash and a one-year convertible note for $2,000,000. The note, which expires on November 15, 2008, is convertible into common stock of the company at a price of $1.10 per share. Funds are currently being held in escrow pending receipt of original titles from the State of Oklahoma.
This purchase forms the major part of the Company's retooling process and puts the Company in an advantageous position to aggressively explore its concession in Nicaragua with a full suite of drilling equipment to meet its requirements for the short and medium term. The flexibility of this equipment will significantly improve daily drilling rates and location moving time thereby improving the level of efficiency in terms of time and cost per well drilled. The anticipated payout period versus contracting an industry driller is 5 months or 5 wells (6500').
Norwood's drilling team is modifying the equipment to meet the Company's specific drilling requirements. Once completed, the equipment will be transported to the port of Houston and shipped to the port of Rama in Nicaragua.
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