Avere Energy will pay 20% of the costs of the initial deep gas well (an estimated $2m net to Avere Energy) to earn a 20% working interest in the play. It must also make payments aggregating $850,000 to American Exploration.
American Exploration signed an agreement with Mainland Resources in October 2009, whereby the two companies pooled their Mississippi lands totaling 13,325 acres. In this farm-in agreement, Mainland Resources was named operator of the project area and agreed to pay 80% of the initial well (drilling and completion costs) for a 51% working interest in the well and total project area.
American Exploration was to pay 20% of the initial well (drilling and completion costs) to earn a 49% working interest in the well and total project area. The additional costs (drilling, completions etc) for oil and gas activities on the 13,225 net acre project area will be split on a 49%/51% basis between American and Mainland respectively.
Subsequent to this agreement, Mainland Resources signed an agreement with Guggenheim Energy Opportunities (Guggenheim), whereby Guggenheim would pay 10% of Mainland Resources’ working interest to earn a 5.1% net interest in the total project area.
With the new Avere Energy agreement, whereby Avere Energy pays 20% of the drilling costs, American Exploration will have no capital exposure in the initial well to earn a 29% revenue interest in the project.
