MegaWest has reached an Amending Agreement with its joint venture partner Kentucky Reserves II, LLC (KRII) to resolve its outstanding work commitment under the Kentucky Purchase Agreement.
Pursuant to the Kentucky Purchase Agreement, MegaWest was obligated to spend U.S. $15,000,000 by October 2009. In the event MegaWest did not complete this work program, the Company was obligated to pay 37.5 percent of the unspent balance to KRII. As of January 31, 2009, MegaWest had spent $4.8 million towards this commitment.
Pursuant to the Amending Agreement, the work program obligations and the attendant penalty payment provisions will be terminated. In return, MegaWest will reduce its working interest in the shallow rights from 62.5% to 37.5% and will transfer operatorship of the leases to KRII.
Further, MegaWest will continue to pay, directly to the lessors of the lands which make up the Kentucky prospect, lease rentals for the 24-month period commencing March 1, 2009, which the Company estimates at $225,000.00.
MegaWest is appreciative of the support of KRII in reaching this agreement in these difficult financial times and will continue to work diligently to achieve the development of the significant resources associated with the Kentucky prospect.
MegaWest is continuing to execute its business plan to create shareholder value. MegaWest owns or has the right to earn an interest in over 146,000 acres in Missouri, Kansas, Kentucky, Montana and Texas. MegaWest seeks to prove up significant resources and achieve production from its heavy oil properties through the application of new technical developments in the commercial thermal recovery of heavy oil and it will continue to take every opportunity to ensure that the Company emerges from these trying times in a position to capitalize on the capability of its personnel and the quality of its heavy oil properties.
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