Canadian Oil

[Tackler]

United Reef JV to farm in Warner area

2007-05-18 13:06 MT - News Release

Mr. Michael Coulter reports

GENERAL REEF SIGNS CONDITIONAL LETTER OF INTENT

United Reef Ltd.'s General Reef Corp. has advised the company that it has entered into a conditional letter of intent with a Canadian oil and gas producer for certain farm-in rights on 40.6 sections (approximately 10,518 hectares) of freehold petroleum and natural gas rights in the Warner area of Southern Alberta. General Reef's farm-in arrangement resulted from negotiation with the farmor following an offer to farm out a large package of fee lands in Southern Alberta in January of this year. The company presently owns 5 per cent of General Reef and has the right to increase its ownership in General Reef as described below.

The LOI provides for the execution of a formal farm-out agreement between the farmor and General Reef and receipt of the farmor's senior management approval. Investors are therefore cautioned that until such time as a formal agreement has been executed and all requisite approvals have been given to the transaction there can be no assurance that the transaction will be completed.

General Reef has advised the company that the farm-out agreement will be effective as of May 1, 2007, and that General Reef's right to earn working interests thereunder will expire, if not fully exercised, on Dec. 31, 2009. The farm-out agreement will require General Reef to drill a minimum of 10 new wells in the first year and to evaluate a minimum of four suspended wells in the same time frame to meet its initial commitment. In addition, General Reef will be required to evaluate five additional suspended wells during the second year of the farm-out agreement. Each completed drilling operation or re-entry will earn General Reef a 100-per-cent working interest in at least one section of land, which will be subject to a combination of lessor and farmor royalties payable to the farmor. As General Reef meets its commitments, described above, it has the option to drill additional wells to earn the remaining unearned petroleum rights over the 10,518 hectares.

Existing gas and oil production from offsetting land is primarily from the Bow Island formation and the Barons formation. The area has stacked pay potential with oil and gas shows in multiple zones including the Belly River/Milk River formation, Alberta group, Barons formation, Bow Island formation, Mannville group and the deeper Turner Valley formation.

General Reef is a private company with offices in Calgary, Alta., and was formed pursuant to an agreement between General Gas Corp., a private Alberta company, and the company for the purpose of acquiring, exploring, and developing oil and gas properties in North America (see news reported in Stockwatch Nov. 16, 2006, and March 30, 2007). General Gas was founded by Douglas Brown, PEng, Ron Hutzal, PEng, and Paul MacKay, PGeo. General Reef is managed by Mr. Brown, Mr. Hutzal and Mr. MacKay. The company has an option to increase its ownership interest in General Reef to 85 per cent by making further capital contributions through subscriptions for additional shares of General Reef. General Reef's management is continuing to develop its portfolio of oil and gas prospects and advance negotiation of other farm-in arrangements.