The company’s Kentucky lease holdings include a 37.5% working interest in 29,147 net mineral acres (10,930 company net acres) with the operator, Kentucky Reserves II holding the remaining 62.5% working interest (MegaWest and KR II together are referred to as Farmor).
The Farmee owns about 1,000 net acres contiguous with Farmor’s leases, which will be included in the joint lands.
Beginning in early in 2011, Farmee, at its sole cost, will drill, test and complete or abandon wells at locations of its choice on the joint lands.
The Farmee will also pay for and construct any production facilities required to produce the wells and will provide the technology required to implement production schemes on the joint land.
During the four-year term of this agreement, Farmee will pay all lease rentals attributable to the joint lands with the Farmee also drilling each year a sufficient number of wells to hold a minimum of 15% of the joint lands.
Any sale of all or a portion of the joint lands during the term of this agreement will result in the sharing of proceeds from such sale by the parties hereto in the same proportions as the revenue interests set forth above, after recovery by the acquiring party of its original lease acquisition costs incurred for the leases being sold.
