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4. Oil and Gas Properties
6 Months Ended
Sep. 30, 2013
Extractive Industries [Abstract]  
Oil and Gas Properties

On July 5, 2013, the Company entered into a Lease Purchase Agreement (the “Lease Purchase Agreement”) with FFMJ, LLC, a Nevada limited liability company (“Seller”), pursuant to which the Company has agreed to purchase Seller’s interest in 22 separate oil and gas leases issued by the Bureau of Land Management for the United States of America (the “BLM”), comprising approximately 32,723 acres within the State of Nevada (the “Leases”), for an aggregate purchase price of $250,000 (the “Purchase Price”). The Company has paid $175,000 and the remaining $75,000 of the Purchase Price is due by November 2, 2013. The Company has also agreed to assume all rental payments due on the Leases starting on July 5, 2013. The Leases will not be transferred to the Company until the Purchase Price installments have been paid in full. The expiration date of each Lease ranges from March 31, 2016 to July 31, 2017. The Leases exclude well or lease bonds in place with the Nevada Division of Minerals and/or the BLM.

 

The Lease Purchase Agreement provides that Seller will deliver the Leases at a minimum 82% net revenue interest, and the Company agrees to assign a 3% overriding royalty interest to Seller on any lease, whether federal, state or fee, obtained on lands within the area covered by or contiguous to the Leases. The Company shall be responsible for all filing and recording fees for BLM and relevant county recorder offices. The Lease Purchase Agreement contains customary representations and warranties of Seller and the Company. The Lease Purchase Agreement also provides that the Company must drill a test well with a surface and bottom hole location on the Leases for the purpose of hydrocarbon exploration and production which must achieve a depth of 6,000 feet, or a depth as otherwise agreed to by the parties. If the Company does not begin drilling with a rig capable of total depth on or before July 5, 2015, the Leases will be reassigned to Seller.

 

We have recorded the $175,000 paid to date as a non-current asset entitled “Prepaid Property Acquisition Costs”. Upon completion of the final payment, the title to the property will transfer to us and we will record the cost as an Oil and Gas Property at that time.