Pegasi Energy Resources Corp. has singed a participation agreement with Pacific World Energy Limited (PWE) for a drilling program of up to 10 wells in East Texas.
In summary, the terms of the agreement are as follows:
PWE pays the full costs of drilling and completing each well to earn an initial 80% working interest in each well. Once PWE has recovered 125% of the well costs, its working interest will decrease to 63.3% in the well;
The initial two wells will be vertical wells with PWE earning a working interest in the leases of the 80 acre proration unit for each productive well;
Following the completion of the first two vertical wells, PWE will have the option to finance further vertical wells, with each productive well earning them a working interest in the 80 acre proration unit for each vertical well or to finance horizontal wells with each productive well, earning them a working interest in the 320 acre proration unit for each horizontal well;