Unitech entered into a farmout agreement pursuant to which it acquired the right to earn a net 65% working interest in 5,576 acres. 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. 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. On June 16, 2011, Unitech spudded a 2,500 foot horizontal well in Maverick County, Texas. Drilling is expected to take 3 weeks. On June 21, 2011, Unitech elected to pay option consideration to oil and gas mineral owners to acquire an 18 month option on 16,096 gross acres (7,989 net acres) and acquire a 77.5% working interest in the rights under an option with oil and gas mineral owners. On or before the end of the 18 month period, Unitech has the right to elect to convert the option into oil and gas leases on some or all of the parcels described in the option agreement. Each lease would have a 3 year primary term from the date of the exercise of the option and Unitech would be required to pay lease bonus consideration upon exercise. The option and any lease entered into upon exercise of the option apply to the formations above the Del Rio Shale and would include the Eagle Ford formation. Unitech has the right to acquire an additional estimated 2,325 net acres under the same 18 month option/3 year lease terms. In addition, Unitech has a call option from a party owing a 22.5% working interest on the 21,672 acre parcel to acquire an estimated 3,790 net acres. The framout, option and lease lands are immediately west of the Comanche Ranch whose oil and gas mineral assets are operated by Newfield Exploration Ltd. (www.newfield.com). Operators of offset wells have reported oil gravity of at least 39 degree API and liquids rich gas with BTU of at least 1,200. The Eagle Ford formation is approximately 400 feet and the Lower Eagle Ford (payzone) is approximately 200 feet.
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