SANTA BARBARA, CA, Nov. 8, 2012 /CNW/ - Underground Energy Corporation
("Underground", "UGE" or the "Company") (TSX VENTURE: UGE; OTCQX:
UGGYF) is pleased to announce today that it has executed a letter of
intent ("Letter Agreement") with AmRich, LLC ("AmRich" or "AmRich
Energy") whereby it is proposed that 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 1,062 gross acres of the Central
Southern section of the Zaca Field Extension Project ("Zaca") in Santa
Barbara County, California (the "Farm-out Lands"). UGE currently owns
80% of the leasehold interest in the Farm-out Lands, and a total 10,482
net acres across its Zaca assets. It is anticipated the final
documentation for the Farm-out (the "Farm-out Agreement") will be
executed on or before November 21, 2012.
Under the terms of the Letter Agreement, it is proposed that AmRich will
enter into a continuous drilling program of up to 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 into production and to
install appropriate facilities and infrastructure to support these
wells. Included in the Farm-out Lands are 2 wells originally drilled
by Texaco in the mid-1980's ("the Hathaway wells"). Under the terms of
the Farm-out Agreement, Amrich will be required to re-complete the
Hathaway wells to a depth of at least 5,990 feet each as part of its 3
well commitment. AmRich will also be required to carry UGE on the
drilling and completion costs of these initial 3 wells and also the
costs of installing facilities and infrastructure to support the wells.
Under the Farm-out Agreement, AmRich will be required to commence
drilling operations on the initial Hathaway re-completion by March 1,
2013 and to follow this initial well with the second Hathaway
re-completion and finally a new well. In addition, under the Farm-out
Agreement, AmRich will only earn interests down to the Upper Monterey
Block at Zaca. Should AmRich decide that it would like to earn
interests in the deeper sub-thrust play recently discovered by
Underground, then it will be required to drill and carry UGE on a 4th well which will be required to be drilled to a sufficient depth to test
the sub-thrust play. Under the Farm-out Agreement, this 4th well will be required to be drilled by December 31, 2014. Once the
initial 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.
"AmRich is pleased to farm-in with Underground Energy on its Zaca Field
Extension Project," said Dr. Amiel David, President and co-founder of
AmRich. "AmRich believes that, as with a number of fields in the Santa
Maria Basin, Zaca has been significantly under-explored and its
potential largely over-looked. We look forward to working with
Underground in realizing the asset's upside potential through the
latest re-development and drilling techniques. Our exploitation and
exploration operations at Midway Sunset in Kern County, along with
Casmalia and Santa Maria Valley oil fields in Santa Barbara County have
been successfully implemented and we believe we bring with us this
in-depth knowledge of unlocking oil production in the Santa Maria
Basin."
"We are pleased to welcome AmRich as a farm-in partner at our Zaca Field
Extension Project with their prominent knowledge and long history of
success in California's oil business," said Mike Kobler, President and
CEO of Underground. "We believe that this Farm-out Agreement will
provide a strong development and production opportunity on our Zaca
acreage and we are excited to work in partnership with such a prominent
operator and producer of the Monterey Shale in the Santa Maria Basin."
"Through this Farm-out Agreement, and our joint venture with Sovereign
announced last week, UGE will be carried on a total of 5 wells over the
next 12-18 months which will see new drilling operations commencing
across the Zaca Field Extension Project which will complement our core
operations and our initial wells drilled on the South East side of the
acreage," finished Kobler.
About AmRich Energy
AmRich Energy is a private oil production company located in Santa
Maria, California that focuses on the production, acquisition,
redevelopment, exploitation and exploration of hydrocarbons in various
California basins. The Company's current areas of operations are in the
Santa Maria Basin and in Kern County, and they are the operator of more
than 200 wells in California. AmRich's company strategy is to develop
reserves/resources in existing oil fields dismissed by previous
operators. President and co-founder of AmRich, Dr. Amiel David has over
40 years of expertise in the energy sector and holds a Ph. D as a
Petroleum Engineer from Stanford University.
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 execution of agreements arising from the Letter
Agreement and the transactions and operations contemplated by the
proposed 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 farm-in; and (ii) that the parties will utilize the existing
well permits in the farm-in; and (iii) 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 Farm-out Agreement is subject to the entry by Underground and AmRich
into a definitive agreement prior to November 21, 2012. While the
parties expect that a definitive agreement will be successfully
concluded upon the terms set forth in the Letter Agreement, there can
be no assurance that a definitive agreement will be concluded on such
terms or at all.
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.
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.