SANTA BARBARA, CA, Jan. 11, 2013 /CNW/ - Underground Energy Corporation ("Underground", "UGE" or the "Company") (TSX VENTURE: UGE; OTCQX: UGGYF) is pleased to announce a definitive farm-out agreement ("Farm-out Agreement") with AmRich Energy, Inc. ("AmRich") details of which were previously announced when the letter of intent was executed on November 8, 2012. Under the terms of the Farm-out Agreement, AmRich will farm-in on and have the right to earn up to a
75% working interest in Underground's and its joint operating partners' interest in 1,063 gross acres of the Central Southern section of the Zaca Field Extension Project ("Zaca") in Santa Barbara County, California ("the Farm-out Lands").
Under the Farm-out Agreement, AmRich will enter into a continuous drilling program of 3 wells to earn its full working interest and acreage position in the Farm-out Lands. It will also be required to put these 3 wells onto production and to install appropriate well facilities and infrastructure. Under the Farm-out Agreement, AmRich will carry UGE on 100% of UGE's interest on the drilling and completion costs of these initial 3 wells, and also the costs of installing associated well facilities and infrastructure.
This initial 3 well program includes 2 wells which were originally drilled by
Texaco in the mid-1980's ("the Hathaway Wells") and AmRich will re-complete these wells as part of its drilling commitment. Underground has secured the land-use permit for the site of the first well intended to be re-completed on the AmRich Farm-out Lands and, provided that final drilling approval has been received, AmRich is required to commence drilling operations on this initial re-completion well by March 1, 2013.
This Farm-in by AmRich initially targets the upper Monterey Zone at Zaca which was historically the main producing zone at the existing Zaca Field. Under the Farm-out Agreement, AmRich has the option to also secure rights to the deeper sub-thrust play discovered by Underground during its drilling operations in 2012 by drilling at least one of its three (3) well obligation to a depth sufficient to test the subthrust play or by drilling a fourth obligation well to test the subthrust play on or before December 31, 2014. Once the initial drilling program is complete and AmRich has earned its full acreage position, the parties will look to drill additional wells as operating partners with each responsible for
its respective share of costs.
"We are pleased to partner with AmRich and finalize the Farm-out Agreement. We look forward to them implementing new drilling operations at our Zaca asset in the very near future," said Mike Kobler, President and CEO of Underground. "We believe that this Farm-out Agreement will provide a strong production opportunity on our Zaca acreage and further validates the potential of the Zaca Field Extension Project. We are excited to cement this joint venture partnership with such a prominent operator in the Monterey Shale."
Other News - Chief Financial Officer
Michael Kobler, President and CEO of Underground, today announced the
appointment of John M. Bean as Chief Financial Officer. John was previously V.P. Finance. He replaces Peter Ballachey, who remains a member of the Board of Directors and a consultant to the Company. Coincident with this appointment, John has been granted 1,050,000 options to acquire UGE common stock, each with an exercise price of $US0.10, vesting one-third upon grant, one-third twelve months after grant and one-third 24 months after grant and with an expiry date
of January 6, 2023, all in accordance with the Company's option plan.
About Underground Energy Corporation
Underground is focused on developing its Zaca Field Extension Project in Santa Barbara County, California. In total, Underground currently holds mineral rights on approximately 63,000 net acres of prospective lands in California and Nevada with an initial focus on the Monterey Shale in California. For more information on Underground, please visit www.ugenergy.com. Underground's regulatory filings are available under the Company's profile at www.sedar.com.
SOURCE Underground Energy Inc.
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