The three prospects, designated as Castle Creek A, B, and C, resulted from the interpretation of a proprietary, three square mile, high-resolution 2D seismic swath survey over the first lead area. The purpose of the seismic survey was to identify the location of a series of normal faults and where they intersect the Niobrara Formation. Rocks within and adjacent to fault zones are subjected to a high degree of strain. Such conditions favor the formation of extensive, high-density, interconnected, fracture networks.
No upfront seismic, acreage, or prospect fees were incurred. By drilling a well on each of the three prospects before October 31, 2003, AOGI and its partners will earn 100% of the drillsite spacing units until payout occurs. At payout, Bissell will have a right to convert a 0.10% over-riding royalty interest into a 50% working interest in the three wells. AOGI and its partners will have a 50% working interest in all subsequent wells drilled on the prospect acreage. The drilling of these initial wells also earns AOGI and its partners an option to participate on the same basis with Bissell in any future prospects on the remainder of their large acreage block in the area, approximately 22,300 acres.
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