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Montana Exploration increases oil and gas lands to a total of 447 000 acres

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Oilfield Technology,

Montana Exploration Corp. has announced that it has signed an agreement with a major regional Utility, to farm-in on approximately 315 000 acres in Blaine and Hill Counties in the State of Montana. Presently, much of this acreage is "held by production" by shallow gas zones, where deeper targets have been significantly under-exploited. Pursuant to the agreement, the company will drill Eagle gas wells to produce gas that will be sold to the Utility. Montana Exploration will also explore and develop other oil and gas zones, including conventional Shaunavon oil.

"This farm-in agreement greatly expands our development inventory of conventional oil and natural gas targets that are economic at current oil and gas prices," said Charles V. Selby, Chairman and CEO. "Montana Exploration also now has a strong strategic joint venture partner, with which it has a greatly-expanded land base for conventional oil and gas development and exploration."

Under the terms of the agreement, the Montana Exploration effectively becomes the drilling partner of the Utility, and is required to drill a minimum of ten wells throughout the farm out acreage within 24 months, of which at least six must be shallow Eagle gas wells.

The Company will pay 100% of all initial drilling and completion costs in exchange for a 100% working interest subject to a 6.25% overriding royalty in the spacing unit of the well before payout of the well and a 75% working interest after pay out. For each non-unitized well drilled, the company will earn a 75% working interest in between 8 and 15 additional contiguous sections, depending on the depth drilled, Eagle wells are drilled to approximately 1200 ft and Shaunavon wells are drilled to 4200 ft.

Montana Exploration will retain operatorship of any oil wells, and for gas wells, the company's partner will pay the tie-in costs, assume operatorship of the wells, and provide a long-term market for all gas produced.

Alongside Montana Exploration’s existing land holdings of 132 000 net acres, the Company now has development and exploration rights to approximately 447 000 acres in the State of Montana, on both the Shaunavon oil and Eagle gas trends. The reserves and production potential throughout this acreage presents substantial upside to the company's shareholders.

Edited from press release by

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