Kodiak Energy announced that its private subsidiary, Cougar Energy, Inc. (Cougar), has reached a standard farm-out and participation agreement with Trivello Energy Corp. ("Trivello"). Trivello will be providing 90% of the funding for the first phase of the "Lucy" Horn River Basin work program. Upon completion of the funding, Trivello will have earned an additional 30% working interest in the wells and property.
Cougar is a private subsidiary of Kodiak and will maintain operator status and majority ownership of the project with the management of Kodiak/Cougar overseeing the execution of the work program. Upon Trivello fulfilling the project funding terms of the farm-out and participation agreement, Cougar's working interest in the "Lucy" Horn River Basin project will be 50%, with Trivello at 40%, and other joint venture partner at 10%.
The a-79-A Lucy well was drilled and cased in Q1 2008. The test results indicated an average to above average total organic compound values of 3.68% with peaks of 5.7% and approximately 60 meters pay zone. It is intended that the first phase of the work program be commenced after spring breakup, consisting of entering the existing a-79-A vertical well bore, perforating the Muskwa/Evie interval, performing a vertical shale gas fracture treatment, testing and evaluating pressures and production. Based on economics, it is expected that the well be equipped and tied in to the existing pipeline located in the northwest corner of the lease. The timing of the tie-in is estimated to be initiated prior to winter 2009.
There is increased exploration, development, pipeline, and facility construction within the Horn River Basin. Several industry comparisons have been made that the Muskwa shale gas potential is an analogue of the Barnett shale gas fields currently being developed in Texas and Oklahoma. The oil and gas industry is continuing their shale gas exploration and development programs in the Horn River Basin and achieving positive results to validate continued activity. Crown land sales by the Government of British Columbia for 2008 exceeded a record value of over C$2 Billion. A favorable royalty regime in the province of British Columbia, along with government commitments to improve access to the Horn River Basin area, presents a positive environment for advancing shale gas exploration and development within the region.
Bill Tighe, President and CEO of Kodiak, stated, "We are very pleased with the arrangement reached with Trivello, as it moves the Lucy Horn River project forward while our private subsidiary, Cougar, focuses on the CREEnergy project. We look forward to working with Trivello on the Horn River project."
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