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Texas
Unitech has committed to drill, complete and equip (to a single well battery stage) a 2,500 foot horizontal well in the lower Eagle Ford formation with multistage completion on the lands located 15 miles south of Eagle Pass in Maverick County, Texas. The lands are located in the Upper Cretaceous Maverick Basin of the Rio Grande Embayment. In this portion of the basin the Eagle Ford is thermally mature, oil bearing and of reservoir quality. It produces oil with no water from horizontal wells. The Eagle Ford shale oil play is considered an unconventional accumulation and is an ideal candidate for horizontal drilling with multi-stage fracture stimulation technology.
The terms of the farmout agreement provide that if Unitech drills and completes this well, it will earn a net 65% working interest in 576 acres and Unitech will be entitled to 100% payback of its costs from the net cash proceeds. If Unitech drills and completes the first well, Unitech will have a rolling option (not an obligation) to drill, complete and equip (to a single well battery stage) an additional five Eagle Ford horizontal wells with multistage completion. The terms of the farmout agreement provide that, for each of the additional five wells that may be drilled and completed, Unitech will earn a net 65% working interest in an additional 1,000 acres for each well drilled and Unitech will be entitled to payback of its costs from the net cash proceeds. If Unitech drills and completes all six wells, it will have the right to become the operator.
The farmout agreement also provides for a put/call provision which provides that at any time after 6 months after drilling a well to earn a working interest in acreage on the lands, Unitech or Batoche Resources Ltd. can commission an independent engineer to prepare an engineering valuation of that parcel in accordance with value methodology which creates the maximum value used by such engineer, provided such methodology is acceptable to the TSX Venture Exchange. Batoche's working interest in such earned acreage shall be valued at an amount equal to the engineered value for proved producing well and one probable well with a pre-tax discount factor of 10% using actual costs ("FMV Earned Acreage"). The farmout agreement provides that Unitech can require Batoche to sale, or Batoche can require Unitech to purchase, Batoche's working interest in such earned acreage for a purchase price equal to the FMV Earned Acreage. The purchase price will be satisfied in part by a cash or debt (40% of the purchase price) as well as by the issuance of common shares of Unitech at the then market price of the common shares (as determined in accordance with the policies of the TSX Venture Exchange). |
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