Gastem, together with its partner Canbriam Energy, has signed a farm-in agreement for a total 85% working interest in both Mundiregina permits (92,104 acres) situated in the St. Lawrence Lowlands. According to the terms of the Agreement, Gastem may earn a 17% interest and Canbriam 68% with the sellers maintaining a 15% carried interest.
The Mundiregina permits are located immediately southwest of Gastem's Yamaska permit, which is presently the subject of a substantial exploration program with two horizontal wells currently undergoing flow tests.
Gastem considers the Mundiregina permits a direct extension of prime Utica fairway as defined by Gastem and others in recent exploration work. A pipeline is present on the property.
Under the terms of the agreement, Gastem will pay the seller an upfront consideration of $2.5M and commit to paying 20% of a 6 well (drill and complete) and seismic program to be carried out prior to December 31, 2010. Upon execution of the program, Gastem will have gained a 17% net interest in the property to the top of the Trenton Formation. Subject to drilling a 7th well by January 2013, and a success fee, Gastem may earn a similar interest from the top of the Trenton Formation to basement rock. A cash consideration for cumulative production is also provided for in the Agreement.
"The agreement doubles Gastem's existing Utica Fairway acreage and materially increases our leverage to the validation of the Utica for commercial production," commented Raymond Savoie, Chairman and CEO of Gastem. "By building upon our experience with the previous exploration programs on the Yamaska property, Gastem and Canbriam are confident that we will be able to undertake an effective exploration program to move this property to potential gas production as quickly as possible."
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