2010-11-04-2010-11-04

To acquire 74.5% interest in approximately 22,000 acres in Kings and Kern counties targeting the San Joaquin Basin.

Zodiac Exploration Inc., Calgary, (Toronto Venture: ZEX) plans to farm in to a California project with Denver-based Bayswater Exploration & Production LLC for $8.6 million.

The package includes 74.5% interest in approximately 22,000 acres in Kings and Kern counties in the San Joaquin Basin.

Zodiac is also required to pay 92% of the costs to drill two wells to test the Monterey and Kreyenhagen formations. The first well will complete Zodiac's earning requirements on approximately 11,000 acres (net 8,195), and must be drilled by Jan. 1, 2013. The second well will complete Zodiac's earning requirements on approximately an additional 11,000 acres (net 8,195), and must be drilled by Jan. 1, 2014.

Bayswater and Zodiac have also agreed to pool their respective lands within an area of mutual interest encompassing the assets and establish a separate 50-township area of mutual interest where they will pursue land acquisitions and prospects jointly on a 75%-25% (Zodiac-Bayswater) basis.

Zodiac president and chief executive Murray Rodgers says, "This transaction increases our land position in Kings County to approximately 80,000 net acres, which we believe are prospective for Monterey, Vaqueros, Kreyenhagen light oil resource plays as well as conventional plays."

The deal is expected to close by Jan. 31, 2011.