Unitech Energy Resources Inc. has been notified by the private operator of Unitech's southeast Saskatchewan override lands, that the first well subject to Unitech's gross overriding royalty interest, has been farmed out to a third party and is expected to spud soon after spring breakup. The Midale formation is targeted. The Lands consist of approximately 6,000 acres within Townships 1 and 8, Ranges 1 to 11, W2M in south-east Saskatchewan. Over 50% of these Lands are in the Tableland area and within the Bakken play trend.
As previously announced on January 3, 2008, Unitech used its proprietary image analysis and pattern recognition system, called Leadscan, to generate a regional geological study covering the Area. The study targeted the Bakken, Frobisher and Midale formations. The consideration payable to Unitech was satisfied by a cash payment of $95,000 and the granting by the private operator to Unitech of a gross overriding royalty ("GORR") and a working interest participation option ("WIPO") on the Lands.
The agreements entered into with the private operator provide for the payment to Unitech of a 3% GORR on new production on the Lands in the Area. The terms of the WIPO are such that Unitech may elect to participate in a well to earn 9% of the operator's working interest on any wells drilled on lands in the Area currently held by the operator by paying 15% of the operator's share of the costs to drill any such wells. Unitech has elected to participate in this Midale well via the GORR rather than pay for an additional working interest.
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