FairWest has entered into a significant farm-out and option agreement covering a portion of its lands in east central Alberta with a public oil and gas company (the "Farmee"). The Agreement also includes an area of mutual interest (the "AMI") for future joint development.

Under the terms of the Agreement, the Farmee is committed to drill five (5) horizontal wells (the "Test Wells") to evaluate the resource potential of the Viking formation. The Farmee will pay 100% of the costs to drill, complete and equip the Test Wells to earn a 70% working interest in 10 sections of FairWest land. The Agreement provides for a rolling option to allow the Farmee to earn additional lands by drilling horizontal Viking wells. FairWest holds high working interests in approximately 38,000 acres of land within the AMI. FairWest will retain 100% of its interests in all existing wells, production and facilities in the area and will be entitled to 30 percent of the production from all lands earned by the Farmee through drilling.

Tags: FairWest Energy