Sovereign Resources LLC, Dallas, has signed a letter of intent under which it would form a joint venture with Underground Energy Corp., Santa Barbara, Calif., on part of Underground’s Zaca field extension project in Santa Barbara County, Calif.
Sovereign will have the right to earn as much as a 75% working interest in Underground’s and its joint operating partner’s interest in 2,857 gross acres of the northwest corner of the extension project. Underground owns 80% of the leasehold interest in the joint venture lands and a total 10,482 net acres across its Zaca asset.
Sovereign would enter into a continuous drilling program to drill a maximum of seven wells to earn its full working interest. Underground and its minority partners will be carried for wells one and two, but thereafter will have the right but not the obligation to pay their share of drilling and related costs for each subsequent well. Underground believes drilling will start within 6 months.