Aurora Oil & Gas Corporation has recently "farmed out" its 64.43% interest in the Wabash Project to Atlas Energy Indiana, LLC (Atlas), a subsidiary of Atlas Energy Resources, LLC.

The Wabash Project is a 121,702 gross acre New Albany shale project located in the Indiana counties of Clay, Greene, Owen, and Sullivan. To date, Aurora has been the majority owner and has served as operator. Aurora has 13 wells drilled in the Wabash project area, all of which may be considered productive, though all are currently shut-in awaiting pipeline infrastructure and processing facilities.

A farmout is a common arrangement in the oil and gas business, defined as a contractual agreement with an owner (farmor) who holds a working interest in an oil and gas lease. The owner may assign all or part of its interest to another party (farmee) in exchange for fulfilling contractually specified obligations.

The terms of this farmout include the following farmee (Atlas) obligations:

1) Drill at least 20 horizontal wells on an annual basis. 2) Pay a well-site fee to Aurora for each well drilled. 3) Accept responsibility for any lease obligations, including payments for lease extensions. 4) Provide Aurora an overriding royalty interest ("ORRI") on the production. 5) Allow Aurora to participate as a working interest owner, if requested, in a 25% working interest in any leases pooled into a drilling unit.

William W. Deneau, Chief Executive Officer, commented, "This agreement furthers Aurora's strategy of making all of Aurora's assets productive. Not only does this farmout create drilling activity on one of our inactive properties, but the existing wells may now be hooked up as a result of the infrastructure expected to be built throughout the project area. We are pleased to be partnering with Atlas, and we believe that their extensive expertise in shale plays will be a driving force in the future of the New Albany shale."

Tags: Atlas Energy Resources, Aurora Oil & Gas Corporation