The Montana leases include working interests in nearly 38,200 unproved net mineral acres in Montana covering three prospects, Teton, Loma and Devils Basin. At Teton and Loma, the Company has a 40 percent working interest.
Acquisition of new 2D seismic over the Teton and Loma prospects has been completed and processed during fiscal 2009. Interpretation of this seismic is complete; however the results to date did not validate the Company’s geological model. As a result, additional geological work will be required before future drilling locations can be determined. At Teton, MegaWest is targeting a heavy oil reservoir, which if successful, may ultimately be developed through the application of SAGD, steam drive or cyclic steam stimulation. At Loma, MegaWest is targeting a light oil reservoir.
The Devils Basin prospect was acquired on July 31, 2008. Trade seismic has been purchased on the Devils Basin prospect, which will be used to identify one or more prospective drill locations that MegaWest plans to test with a vertical or horizontal well. At Devils Basin, MegaWest is targeting light oil production from the Heath Shale.
In addition, MegaWest and its working interest partner have established a regional Area of Mutual Interest (“AMI”) covering approximately 1,000,000 acres that shall remain active until October 2009. The interest in the AMI shall be divided 65 percent to MegaWest and 35 percent to its partner. MegaWest shall pay for the lease acquisition, initial geological and geophysical activity, drilling and completing of all wells, if any, comprising an agreed upon initial work program for each new prospect within the AMI and shall receive 100 percent payout of all such costs and expenses incurred for each such prospect prior to its partner receiving its share.
(Information updated to September 12, 2009)