Terra Nova pays 100% of the first Six Wells before qualifying for its 55% interest-
That is in addition to the seismic programs on both leases-
HOUSTON, March 26, 2012 (GLOBE NEWSWIRE) -- Holloman Energy Corporation (HENC.OB) announces the selection of Terra Nova Minerals Inc. as partner in the exploration of its Australian Cooper Basin holdings. In a Letter of Intent dated March 19, 2012 (the "LOI"), Holloman and Terra Nova set out terms by which, Terra Nova may earn a 55% working interest in Holloman's PEL 112 and PEL 444 Australian concessions by funding seismic acquisition and a six (6) well drilling program on the properties.
"Terra Nova brings the expertise and financial resources we need," stated Mark Stevenson, Holloman CEO. "Their officer and director group, led by oilman Norm Mackenzie, has a proven record of success. We believe their experience, together with the exploration commitments we've negotiated, are sufficient to capitalize on the substantial exploration opportunity our acreage provides."
Under the LOI, Terra Nova's obligations include the short-term payment of $350,000 in fees and the deposit of seismic acquisition funds of AUD$4.7 million (USD$4.55 million required within 15 days of regulatory approval of the LOI and USD$735,000 by May 1, 2012). In addition, the deposit of drilling funds totaling AUD$9.0 million (USD$9.45 million) is required in two equal installments due on or before November 1, 2012 and March 1, 2013, respectively. Terra Nova shall act as operator with respect to seismic acquisition on PEL 444 and all drilling work contemplated by the Letter of Intent.
Upon deposit of the seismic acquisitions funds, Holloman will transfer to Terra Nova a 20% working interest in each license. On drilling and abandonment or completion of each of the six wells contemplated by the LOI,Terra Nova shall be deemed to have earned an additional 5.8333% working interest in each of the licenses (an additional 35% working interest in the event the entire drilling program is completed). Holloman contemplates that the working interests earned by Terra Nova will be contributed by all current working interest holders in the licenses on a pro-rata basis in accordance with their pre-farmout interest positions.
Terra Nova is required to solely fund dry-hole costs for the first three wells drilled. In the event any well drilled as part of the six (6) well program on PEL 112 and PEL 444 tests positively for commercially viable production of oil or gas, Terra Nova will also pay 50% of the total completion costs of such well(s). Other working interest holders, including Holloman, will pay their portion of the residual 50% of completion costs on a pro-rata basis.
The LOI is subject to ordinary course due diligence, participation of third party working interest participants, the signing of a definitive agreement, and regulatory approvals.
In the event any well drilled by Terra Nova is completed, Terra Nova will be entitled to 80% of the net revenues attributable to the other working interest owners (including Holloman) until Terra Nova recovers its cost of drilling the well.
To finance the seismic and drilling programs, Terra Nova plans to raise approximately $11,000,000 (in Canadian dollars) through the private sale of its securities.
About Holloman Energy
Holloman Energy Corporation is focused on exploring and producing oil in Australia's Cooper Basin. Holloman's Cooper Basin leases include interests in PEL 112 and PEL 444 which comprise 4,544 Sq km (1.125 million acres) in the southwest and northwest sectors of Australia's prolific Cooper – Eromanga Basin.
After the initial SIX Wells all partners are responsible for their proportionate shares of expenditures on subsequent wells-
