PetroHunter Energy Corporation declares the closing of the transaction in which PetroHunter sold an undivided 25% working interest in five wells, including the 40-acre tract surrounding each well, to Falcon Oil & Gas Ltd. The wells are located in PetroHunter's Buckskin Mesa project in the Piceance Basin in Rio Blanco County, Colorado. The five wells were drilled by PetroHunter but have not been completed.

As part of the transaction, PetroHunter also granted Falcon an option to acquire an undivided 50% working interest in PetroHunter's 20,000-acre Buckskin Mesa project. As operator, PetroHunter will conduct the testing and completion program. As consideration for the working interest and option, Falcon will pay for all testing and completion costs related to the five wells, up to $7 million. Following the completion program, Falcon will have up to 60 days to decide whether to exercise the option.

If Falcon elects to exercise the option, it will pay an additional $18 million for drilling and development in Buckskin Mesa, with $9 million representing a 50% carried interest credited to PetroHunter. Further, Falcon will pay $25 million directly to PetroHunter, subject to adjustment under the agreement, payable in cash, Falcon stock, or a combination of both. PetroHunter will retain an undivided 50% working interest in the Buckskin Mesa leases, and will remain operator of the properties, subject to Falcon's election to become operator upon the payment of an additional $3.5 million in cash or Falcon shares.

"Through the testing and completion program, PetroHunter and Falcon will obtain critical technical information," stated PetroHunter's Chairman and CEO, Charles B. Crowell. "Within the next 90 days, PetroHunter should be in a position to further evaluate the Buckskin Mesa project and determine the extent of its commercial potential."

Tags: PetroHunter Energy Corporation