Western Standard Enters Deal for Valley County Gas Acreage in Montana

Western Standard Energy, an oil and gas exploration company with home offices in London, has entered into a Farmout Agreement with Coastal Petroleum Company, for leases on 42,000 acres of The Starbuck Prospect in Valley County Shallow Gas Assembly in Montana.

The agreement terms, state that Western Standard is to pay 100% of the test well and lease rentals, for 100% of working interest before payout and 80% of working interest after payout of the test well.

Western is also allowed to purchase 50% interest in leases owned by Coastal in the Starbuck, if it does so within 30 days after the test well has been completed. When payment is received, Coastal assigns 50% of undivided working interest in the leases to Western.

From the purchase on, Coastal and Western will each pay 50%, and each be entitled to, 50% of the revenues in wells. When Western has earned 50% undivided interest in the leases, either party may propose a well within the leases or additional acreage acquired within the four mile area of mutual interest. The other party may opt-in or opt-out of the proposed well, on a well-by-well basis.

Western, following a successful well test, can elect to: (1) drill four step out wells; (2) complete a reserve study; (3) obtain financing based upon the reserve study to develop the field; and (4) install needed pipelines to carry gas to transmission lines.

Coastal is the designated operator for all operations on the leases for joint accounts except where Coastal declines to participate in the drilling of a well or wells by Western, in which case, Western can elect to be the operator and owner.

Dan Bauer, CEO of Western Standard Energy, states: "We are excited to complete the Starbuck Prospect acquisition and look forward to developing current targets and future prospects in this resource rich region. We intend on drilling our first test well in the immediate future to begin the process of proving out the prospect."

The Starbuck Prospect is a shallow multiple zone natural gas field on trend with approximately 34,000 feet of closure. Starbuck is about the same size as the 1 TCF Tiger Ridge Field in west Hill County, and has similar characteristics to the Bowdoin Gas Field in Phillips and Valley County, but has no proven reserves. Bowdoin Field is the second largest gas field in Montana with more than 1,200 wells and cumulative production exceeding 500 Bcf of natural gas.

Successful natural gas wells in these fields have encountered long production lives and prolific production rates with significant recoverable reserves. The area is further defined by shallow hydrocarbon depths from 1,000-3,800 feet. Many wells produce for 20 years, making for long term investments.