Coastal Caribbean Oils & Minerals President and CEO Phillip Ware said that the company's wholly owned subsidiary, Coastal Petroleum Company, has entered into a farmout agreement with Western Standard Energy on certain Slope County, North Dakota Leases.
This Second farmout agreement with Western Standard provides the opportunity for both companies to begin exploration in North Dakota while exploration in Montana continues.
Under the new farmout agreement, Coastal will assign leases over four of Coastal's high-graded Lodgepole Reef prospects to Western Standard in return for U.S. $80,000. Coastal will also retain a back-in working interest of 20% in the leases after payout.
The leases cover all rights below the Tyler formation, including the Lodgepole formation, with an 80% net revenue interest. These and other leases in the area were acquired in 2005 by Coastal from Oil For America for $50,000 and Coastal has invested some additional funds to geochemically test and high-grade these and other prospects on the leases.
Oil For America has agreed to waive the drilling obligation on these four prospects. After the assignment, Coastal will still retain additional Lodgepole reef prospects on its North Dakota leases.
This agreement is separate from and in addition to the two farmout agreements Coastal has entered into relating to its Montana leases. The first of those agreements was also with Western Standard, but was on leases over a 34,000 acre shallow gas structure in Valley County, Montana. The first well drilled under that agreement found the structure to be high as expected and drilled through two potentially productive gas zones, both of which had shows of gas.
Operations to complete and test the well were scheduled to begin at the end of November, but were delayed by equipment repairs. The well is located on federal land, and the Bureau of Land Management will not allow the completion and testing operations or any further drilling to begin until the spring, so operations have been suspended until that time.
Ware said, "The companies are taking advantage of this time to complete permitting for the four step-out wells needed to quantify reserves."
The stepout wells could also test the four deeper objective formations that may contain gas as well. In the Memorandum of Understanding which gave rise to the new farmout agreement, Western Standard also agreed that the more than $29,000 originally forwarded to be used for completion would be used by Coastal to cover the costs associated with the delay in operations, including annual rentals.
This amount combined with the $80,000 paid for the four reef prospects will help cover the company's operations during the first half of 2008.
The second recent agreement Coastal entered into this fall was with F-Cross Resources covering the northwestern part of the Valley County, Montana Leases. The first Lodgepole test well was begun under that agreement in early November and drilling has finished, but the well is awaiting completion and testing of several zones that have potential for both oil and gas.
Unlike the shallow gas well, this well is located on state land, not federal land. Provided that there is no State objection, the Coastal expects F-Cross will resume operations to complete and test weather permitting.
Most Popular Articles