FormCap will pay Kerr and Keta two hundred dollars ($200) per acre for up to 2400 acres of Leases, at a cost not to exceed a total of four hundred and eighty thousand dollars ($480,000) unless agreed otherwise by the company.
FormCap has paid Kerr and Keta two hundred thousand dollars ($200,000) to 6 February, 2014. FormCap is currently evaluating a specific block of 875 acres (from the 2400 acre total) of prospective oil leases to acquire from Kerr and Keta.
FormCap will own 100% of the leases (80% net revenue to FormCap; 20% freehold royalty), and will be operator. FormCap will have the option to purchase additional leases in Cowley County from Kerr and Keta under an Area of Mutual Interest (AMI), the terms of which are set forth in the Agreement. FormCap is required to drill one (1) well in each of the first two (2) years of the Lease term to maintain its interest in the Leases.
FormCap will also have the option to participate in the drilling of up to six (6) exploration or development wells on lands currently owned by Keta and Kerr under terms set forth in the Agreement.
Significant quantities of oil and gas have been discovered and produced in Cowley County in recent years. The prospects for oil production are excellent with multi-zone potential for both vertical and horizontal development. In addition to the Mississippian, zones producing in this area include the Layton, Lansing-Kansas City, Bartlesville, Stalnaker and the Arbuckle.
Graham Douglas, CEO of FormCap reports that "FormCap is excited about the potential of its relationship with Kerr and Keta in Cowley County, Kansas as there are tremendous opportunities to produce commercial light oil and gas in an environment of high crude oil prices and low finding and developing costs."
