Brandenburg Metals Corp., Vancouver, (TSX: BBM) has signed a joint venture letter of intent (LOI) with Houston-based Holloman Energy Corporation (HEC), pursuant to which the company can earn an undivided 44% working interest in two onshore concessions known as Petroleum Exploration License 112 (PEL 112) and Petroleum Exploration License 444 (PEL 444)(PEL 112 and PEL 444 collectively, the PELs). The PELs cover 1,125,000 acres in South Australia's Cooper Basin Western Flank Oil Play. The Department of Primary Industries and Resources of South Australia reports that the Cooper Basin has sourced over 4 billion barrels of oil and 5 trillion cubic feet of recoverable gas. The Cooper Basin has in excess of 120,000 kilometers of 2-D seismic data and more than 1,200 wells in 65 oil and 20 gas fields. The primary "target formations" in both of the licensed areas are the Birkhead, Hutton and the Namur sandstones. Depth for the formations range from 1500-1800 meters.
HEC and the company intend to enter into a definitive earn-in agreement in relation to the company's right to earn a 44% working interest in the PELs.
Under the terms of the LOI, the company will earn an undivided 44% working interest in each of the PELs, as follows:
- With respect to PEL 112, by paying HEC:
- AUD$150,000, on or before June 1, 2011, which will be paid into trust and transferred to HEC on execution of a definitive agreement, to be used for seismic work area clearance on the PEL 112;
- AUD$450,000, on or before June 1, 2011, which will be paid into trust and transferred to HEC on execution of a definitive agreement, to be used for initiating a 3D seismic acquisition program covering approximately 125 square kilometers on PEL 112 (the PEL 112 Seismic Program);
- AUD $3,050,000, on or before July 1, 2011, to continue to complete the PEL 112 Seismic Program;
- AUD$4,500,000, on or before July 1, 2011, which will be paid into trust and transferred to HEC on completion of the PEL 112 Seismic Program, for use in the conduct of a three well drill program on the PEL 112 (the PEL 112 Drill Program). In connection with the PEL 112 Drill Program, the company will sole fund, with up to AUD$4,500,000, dry-hold costs of three wells on PEL 112. In the event any well drilled as part of the PEL 112 Drill Program tests positively for commercially viable production of oil or gas, HEC and the company will each pay 50% of the total aggregate completion costs respecting the wells.
- With respect to PEL 444:
- AUD$150,000, on or before February 1, 2012, for use in seismic work area clearance on PEL 444;
- AUD$450,000, on or before February 1, 2012, for use in initiating a 3D seismic acquisition program covering approximately 125 square kilometers on the PEL 444 (the PEL 444 Seismic Program);
- AUD $3,050,000, on or before April 31, 2012, to continue to complete the PEL 444 Seismic Program;
- AUD$4,500,000, within 30 days following the initiation of fieldwork on the PEL 444 Seismic Program, for use in the conduct of a three well drill program on the PEL 444 (the PEL 444 Drill Program). In connection with the PEL 444 Drill Program, the company will sole fund, with up to AUD$4,500,000, dry-hold costs of three wells on PEL 444. In the event any well drilled as part of the PEL 444 Drill Program tests positively for commercially viable production of oil or gas, HEC and the company will each pay 50% of the total aggregate completion costs respecting the wells.
The Conditional PEL 112 Payments will be repaid to the company in the event HEC and the company do not enter into a definitive agreement.
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