Solimar Energy has signed a Farmout Agreement on the Company's Kreyenhagen Project area in the San Joaquin Basin, California.

• Execution of a definitive Farmout Agreement covering the Company's Kreyenhagen Field Heavy Oil and Shale Oil leases. Solimar will maintain operatorship and majority working interest (WI) in the project. • Phase I of the agreement consists of the Farminee funding up to a $2 million USD cap, the drilling of four appraisal and development wells, the fracking of two wells and the compilation of a reservoir model, plus a $500,000 USD cash payment to earn 15% working interest (WI) in the 1,720 acre heavy oil project area. • Phase I operations will immediately commence and it is anticipated that drilling will begin in Q3 2013 following final determination of locations and well plans, site preparation, and contracting for services. • Phase II of the agreement consists of the Farminee funding up to a $3 million USD cap, a steam enhanced recovery pilot program and thermal modeling in the project area plus a $1 million USD cash payment to earn an additional 25% working interest (WI) in the heavy oil leases and 12% working interest (WI) interest in the 8,626 acre Kreyenhagen shale oil acreage. • The Phase I and II work programs will provide the empirical validation of the independently assessed (Sproule, July 2012) contingent recoverable resource (Best Estimate) of 4.2 mmbo in the central 117 acre field area. The Company further anticipates delineating a substantial portion of the undiscovered oil in place resource (Sproule, July 2012) of up to 24 mmbo (Best Estimate) and 50 mmbo (High Estimate) along trend in the Company's acreage, which together creates the basis for a potential $400 million USD project value.

Tags: Solimar Energy Limited