Clayton Williams Energy, Inc. has entered into a farmout and exploration agreement with Caza Oil and Gas, Inc. ('Caza') covering a portion of the Company's 71,000 net acre resource play in Reeves County, Texas. All of the approximate 15,000 net undeveloped acres covered by this agreement are located along the western flank of the Company's acreage block. The Company has drilled no horizontal Wolfcamp wells within the farmout area.
Under the terms of the agreement, Caza will pay 75% of the costs of the initial horizontal Wolfcamp well to earn 50% of the acreage associated with that well (either 640 or 1,280 gross acres, depending on lateral length). After the initial well, Caza will pay 100% of the costs of all other Carried Wells (as defined in the agreement) to earn 75% of the associated acreage. The Company will pay its 25% of the cost to drill and complete all density wells drilled on previously earned acreage.