It is anticipated that GEA will form a new, wholly owned subsidiary and transfer the royalty interests in the oil wells to this entity.
Xun will then acquire 51% of the common stock of the subsidiary and have a right of first refusal to purchase the remaining 49% in the subsidiary.
GEA and affiliates have exclusive drilling rights to about 60,000 acres of oil and gas bearing properties with landowners in central and south central Kentucky and Tennessee whereby GEA and affiliates will get 100% of the net revenues after the landowner’s royalty fee that will be between 12.5% and 28.125% and applicable transportation costs, per producing well.
The subsidiary will be responsible for the funding of the drilling and completion costs.
The LOI will provide a framework for the parties to enter into a definitive agreement which is anticipated to be approved by the respective board of directors on or before 17 January 2011.
The parties reserve the right to modify the structure of the transaction to facilitate any required regulatory approvals and to minimize the tax consequences of the transaction.
GEA is in the business of exploring, developing, operating, and investing in, acquiring, selling, managing and drilling oil and gas properties.
