Admiral Bay Resources Inc. reports it has signed a farmout agreement with Euramerica Energy Inc. of Brescia, Italy to drill 25 wells in 2009 and 25 wells in 2010 in the Thayer and Mound Valley projects for a total commitment of $5.75 million. Euramerica will pay all the costs of drilling and completing the wells for a turnkey fee. Upon connection to the pipeline, the Company will retain a 20% working interest and be operator and Euramerica will earn an 80% working interest in each well. Euramerica earns only the wellbore and associated spaced land for each well it funds. Assuming average gross gas reserves of 150 mmcf per well as based on the Company’s 2008 reserve report, the 20% carried interest would add 1.5 bcf to Admiral Bay’s proved producing reserves for the wells drilled under the farmout. In addition, up to 50 proved undevelope d locations could be added to Admiral Bay’s reserve base or up to 7.5 bcf depending on the locations agreed upon, all at no cost to the Company. The Company expects drilling to commence within 60 days once Euramerica has completed its funding. The location of the wells is to be determined by the Company and Euramerica.
President and CEO Steven Tedesco commented:
"This deal allows us, on a carried basis, to grow production and continue to prove up additional reserves in this difficult financial environment without incurring additional debt. This deal along with our recently announced acquisition of the Thayer project show our commitment to growth during this down cycle in the natural gas business so that we are well positioned when the price environment turns in the future. The level of commitment by Euramerica shows the quality of our asset base and we look forward to working with them to increase production, cashflow and proved reserves."