Underground Energy announces completion of Farm-out Agreement with AmRich Energy
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.
Statements in this press release contain forward-looking information and forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking information"). Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward-looking information in this press release includes, without limitation, statements with respect to the drilling and other operations to be carried out by AmRich under the terms of the Farmout Agreement and the potential additional drilling to be carried out by Underground and AmRich following completion of the drilling obligations under the Farm-Out Agreement.
Although we believe that the expectations and assumptions reflected in the forward-looking information are reasonable, there can be no assurance that such expectations or assumptions will prove to be correct. In particular, assumptions have been made that: (i) Underground and AmRich will obtain all required regulatory approvals for the drilling and other operations contemplated by the Farm-Out Agreement; and (ii) that AmRich will have the necessary capital to complete its obligations under the proposed Farm-Out Agreement.
Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and is subject to a variety of risks and uncertainties and other factors (many of which are beyond the control of Underground) that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking information include, but are not limited to: operational risks in exploration, development and production; delays or changes in plans; competition for and/or inability to retain drilling rigs and other services; competition for, among other things, capital, acquisitions of reserves, skilled personnel and supplies; risks associated to the uncertainty of reserve and resource estimates; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical, drilling and processing problems and other difficulties in producing reserves; the uncertainty of estimates and projections of production, costs and expenses; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; incorrect assessments of the value of acquisitions; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; access to capital; and other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking information contained in this news release is expressly qualified by this cautionary statement. Underground does not undertake any obligation to update or revise any forward-looking statements to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.
The appointment of Mr. John Bean as the Chief Financial Officer of the Company is subject to the approval of the TSX Venture Exchange.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE: Underground Energy Inc.For further information:
Chief Financial Officer
Underground Energy Corporation
Tel: 805-845-4700 x33
Vice President, Corporate Development
Underground Energy Corporation