Gastem has signed a Letter of Intent with Utica Energy establishing new conditions for the earn-in on exploration and development leases in New York State originally signed in February 2008. The new Letter of Intent is subject to regulatory and Board approvals as well as the signing of a final agreement.
Under the terms of the previous February 2008 agreement, Gastem USA was to undertake an earn-in drill program evaluated at $4,000,000 and composed of 5 vertical wells and one horizontal well prior to January 16th 2009 (later modified to January 2010) in order to earn a 65% working interest in all 29,000 acres owned by Utica Energy. Furthermore, Utica Energy maintained a 5% ORRI on these leases.
Under the terms of the new Letter of Intent, Gastem and its wholly owned subsidiary, Gastem USA, will pay $35,000 USD, drill and complete 1 key exploratory vertical well and provide 3,500,000 common shares of Gastem vested over a period of six months, subject to regulatory approval, to Utica Energy. Gastem will pay 100% of the drilling and completion of the first well. Upon Gastem completing all of the above, Gastem will have acquired an 80% interest in the 34,150 acres (including recently obtained leases). Utica Energy will retain a 2% ORRI in existing leases and in new leases within the AMI in New York State. Utica Energy also retains the option to participate up to 20% working interest in new land acquisitions within the AMI.
"The new agreement is flexible for both partners in New York State. The Utica shale exploration and development along with Marcellus and Onieda Sand potential creates a real value opportunity for our shareholders," commented Raymond Savoie, Gastem Chairman and CEO. "We plan to proceed with the three drilling permits recently granted by the New York State authorities and drill the first test well as soon as possible."
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