Exploration pending in northwestern Arizona

Exploratory drilling could be nearing in a remote area of northwestern Arizona.

By OGJ editors
HOUSTON, Sept. 8
-- Exploratory drilling could be nearing in a remote area of northwestern Arizona.

Forest Gate Energy Inc., Montreal, signed an agreement to acquire a 70% equity interest in all Arizona oil and gas leases held by Vanterra Energy Inc., a private Calgary firm.

On completing the deal, Forest Gate would issue to Vanterra 2.69 million Forest Gate common shares, 5.25 million subscription receipts convertible into Forest Gate common shares without further consideration, and 7.3 million warrants at an exercise price of 25¢/share. The warrants would expire on the second anniversary of issuance.

Vanterra is owned by Don Vandergrift, a Calgary petroleum engineer. The company targets oil in the Sacramento Valley Neogene subbasin generally west of Kingman, Ariz., part of the Basin and Range Province. Forest Gate noted that the Railroad Valley Neogene subbasin of the Basin and Range Province in Nevada 250 miles northwest has produced more than 42 million bbl of oil.

Forest Gate and Vanterra plan to drill an 11,000-ft well targeting Jurassic Navajo sands at 6,000 ft, Mississippian carbonates at 9,160 ft, and the Devonian carbonates at 10,160 ft. They chose a drillsite based on a seismic program acquired by Phillips Petroleum Co. in 1981 and later licensed to Vanterra.

Vanterra ran geochemical and geo-electromagnetic surveys covering 50 stations over the southern part of the prospect area in 2008.

Geochemical sampling tested for methane, ethane, propane, butane, ethylene, and propylene and confirmed an active hydrocarbon system in the vicinity. The geo-electromagnetic survey consistently showed direct hydrocarbon indicators at depths consistent with interpreted depths for Devonian and Mississippian carbonates, Forest Gate said.

The area is accessible for drilling equipment and has been approved for drilling by federal and state land agencies.

The Mohave County holdings include 100% interest in 7,800 acres of federal land with a 10-year term ending in July 2017, 100% interest in 3,200 acres of state lands with a 5-year term ending in February 2012 and renewable by request, and 90% interest in 12,800 acres of freehold lands with a 5-year term ending in August 2011 and renewable by request.

Vanterra is negotiating for a further 10,784 acres of freehold minerals.

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