Matrixx was part of this group of leases. Jacobs was with Texhoma Energy before coming to this company. You may recall that Matrixx was doing business with Texhoma when they did all that drilling back in 2007 (?)
VELOCITY ACQUIRES GULF OF MEXICO PARTICIPATION RIGHTS
November 30 2007
Velocity Oil & Gas, Inc. (“Velocity” or “the Company”) is pleased to announce that on November 8, 2007 the Company entered into a definitive Purchase and Sale Agreement acquiring the participation rights to five oil & gas exploration blocks. The participation rights were acquired from Entek USA Inc., a wholly owned subsidiary of Entek Energy Ltd. an Australian company listed on the Australian Stock Exchange (“Entek”).
The exploration blocks are located in federal waters in the Gulf of Mexico offshore Texas, Louisiana and Alabama covering a total of approximately 23,000 acres. All Blocks are in relatively shallow water ranging in depth from 100 to 240 feet, have 3D-seismic coverage and have 14 drilling targets identified. The first well is expected to be drilled in early 2008 in the Viosca Knoll Block 79 (“VK-79”) to a target depth of 2,900 feet. The estimated share of Velocity’s drilling cost is $300,000 and completion costs are $230,000.
Velocity now has the opportunity to earn a working interest in the blocks by paying on a promoted basis a third for a quarter for the work programs outlined in the Participation Agreement with the operator, Ridgelake Energy, Inc. a private company based in New Orleans, which in four of the five blocks are the first exploration well down to casing point.
To date, the operator and other joint venture participants have spent a total of approximately $5 million on the acquisition of the leases, seismic data and geological work. As part of the terms of the agreements, Velocity will be required to reimburse Entek its share of the sunk costs plus interest ($878,987) from 50% of the net production revenue. The repayment obligations are only applicable from discoveries in the particular exploration block (ring-fenced). The exploration rights and the repayment obligations are summarized as:
OCS Lease No. and OCS Area Name/ Block:
Forward
Cost Paid
Interest Earned
Payments to Entek
OCS-G 26190; Viosca Knoll Block 79 (“VK 79”)
13.333%
10.00%
$ 65,292
OCS-G 26560: High Island Area, East Addition, South Extension, Block A 307 (“HI A-307”)
13.333%
10.00%
$ 62,839
OCS-G 27078; Vermilion Area, South Addition Block 317 (“VM 317”)
13.333%
10.00%
$ 127,479
OCS-G 27089; South Marsh Island, South Addition Block 138 (“SMI 138”)
15%
11.25%
$ 299,425
OCS-G 27091; South Marsh Island, South Addition Block 152 (“SMI 152”)
20%
15.00%
$ 323.952
In addition a $193,270 payment is payable to Entek in case of a discovery in any block payable out of 50% of revenue from any exploration block.
A finder’s fee of 500,000 shares is payable to Sterling Grant Capital, Inc. a Vancouver based will be payable upon closing of the transaction.
Mr. Jacobs, the President and CEO commented: “I am delighted with the acquisition as it is laying the foundation for our growth-plans in the greater Gulf of Mexico area. The exploration concessions contain low-risk prospects and even proven reserves for the Company
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