Enterra delivered a notice of termination for non-performance under the terms of its Farm-out Agreement with North American Petroleum Corporation USA, a wholly owned subsidiary of Petroflow Energy Ltd. ("Petroflow"). Under the Agreement which began in March 2006, Petroflow was required to maintain a certain pace of drilling to continue its right to drill on lands owned by Enterra in a seven county area in the Oklahoma Hunton play. Since the initiation of this partnership 64 wells were drilled into the Hunton formation in Oklahoma with very positive overall economic performance. Enterra will continue to develop the Hunton play on its lands.
Petroflow ceased drilling in February of 2009, and has not indicated that it will be able to continue drilling with any certainty in the foreseeable future. Accordingly, Enterra has provided Petroflow with a notice of termination pursuant to the agreement. Enterra continues to engage Petroflow in discussions about future arrangements, but no agreement has been reached on terms to further the joint venture.
"Petroflow has been a reliable partner for more than three years and the results of the farm-out have been positive for both companies with a 97% drilling success rate", commented Don Klapko, Chief Executive Officer of Enterra, "The Hunton resource de-watering play has strong economic performance even at current natural gas prices. This resource play remains one of Enterra's key development areas."
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