Oil and Gas Properties [Text Block] |
6.
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Oil and Gas Properties
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(a)
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Proved properties
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Properties
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October 31,
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Addition
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Depletion
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January 31,
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2013
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2014
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U.S.A. – Proved property
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$
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3,427,086
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$
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25,000
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$
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(57,188
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$
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3,394,899
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(1)
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Palmetto Point Project
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On December 21, 2005, the Company agreed to purchase a
20% working and revenue interest in a
10
well drilling program in Mississippi owned by Griffin & Griffin Exploration for $700,000. Concurrent with signing the Company paid $220,000
and January 17, 2006 the Company paid the remaining $480,000. The Company applied the full cost method to account for its oil and gas properties, seven wells were found to be proved wells, and three wells were found impaired. One of the wells was impaired due to uneconomic life, and the other two wells were abandoned due to no apparent gas or oil shows present. The costs of impaired properties were added to the capitalized cost in determination of the depletion expense.
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On September 22, 2006, the Company elected to participate in an additional two-well program in Mississippi owned by Griffin & Griffin Exploration and paid $140,000. The two wells were found to be proved wells.
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On June 23, 2007, the Company acquired an assignment of
10% gross working interest from a third party for $520,000
secured loan payable. The Company recognized $501,922
in the oil and gas property.
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On October 4, 2007, the Company elected to participate in the drilling of PP F-12-3 in Mississippi by Griffin & Griffin Exploration. The Company had
30% gross working interest and paid $266,348. On July 31, 2008, the Company accrued and paid an additional cost of $127,707
for the workovers of wells PP F-12 and PP F-12-3. PP F-12 started production from October 2007, and PP F-12-3 started production from November 2007.
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On April 3, 2009, the Company entered into an Asset Purchase Agreement to acquire additional interests in its existing core producing Mississippi oil and gas properties. The Company paid $40,073.39
to acquire additional
2% working interest in the proven Belmont Lake oil and gas and an additional
10% working interest in potential nearby exploration wells. At this time the total working interest for Belmont Lake is
32%; and total working interest in the exploration wells on approximately
140,000
acres surrounding Belmont Lake in all directions is
60%.
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The Company had a short-lived opportunity to acquire additional fractional interests in the Belmont Lake 12-4 well which was expected to be a horizontal well. An unrelated third party did not participate in its right to participate in the 12-4 well, and therefore a share of its interest (a “non consent” interest) was made available to the other participating parties including Lexaria. On August 28, 2009 and effective on September 1, 2009, to take best advantage of this opportunity, the Company entered into four separate assignment agreements, three of which were with people or companies with related management. The Company received from these four parties proceeds of $371,608.57
to fund additional interests in this well. As a result, the Company has a
25.84% perpetual gross interest in the well (
18.0% net revenue interest); as well as a
5.2% net revenue interest in the non-consent interest. The non-consent interest remains valid until such time as the well produces
500% of all costs and expenses back to the participants in the form of revenue, at which time the non-consent interest ends. Enertopia, a company with related management, had acquired from Lexaria a
6.16% perpetual gross interest in the
12
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4
well; David DeMartini, a director of Lexaria, acquired from Lexaria a
5% gross interest in the non-consent interest in the 12-4 well; and Kelowna Resources Group formerly known as 0743608 BC Ltd. a company owned by the President of the Company, acquired from Lexaria a
11.60% gross interest in the non-consent interest in the 12- 4 well.
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On May 31, 2010, the Company signed a Settlement Agreement with Enertopia Corp., whereby the Company issued
499,893
units at $0.12
per unit and each unit consists of one restricted common share and one share purchase warrant at $0.20
per share for a period of two years in exchange for the working interest initially assigned on August 28, 2009.
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On June 16, 2010, the Company signed a Settlement Agreement with a third party, who had originally participated in the August 28, 2009, opportunity in the non-consent interest for Belmont Lake 12-4. The Company returned back $144,063.46
to the third party and cancelled its participation.
On July 29, 2010, the Company had agreed with its Operators at Belmont Lake not to proceed to drill a horizontal 12-4 well. Rather, two of the three proposed vertical wells 12-2, 12-4, or 12-5 were proposed to be drilled. To take best advantage of this opportunity, the Company cancelled all previous agreements relating to August 28, 2009 with respect to Belmont Lake horizontal well 12-4 and entered into three separate assignment agreements, of which all three were with people or companies with related management. The Company received total proceeds of $324,677.12
to fund additional interests in these wells. As a result, the Company had a
32% perpetual gross interest in the wells (
24.0% net revenue interest); as well as a
8% gross interest (
6% net revenue interest) in the non-consent interest. The non-consent interest remains valid until such time as the well produces
500% of all costs and expenses back to the participants in the form of revenue, at which time the non-consent interest ends. Emerald Atlantic LLC, a company owned by a director of Lexaria, acquired from Lexaria a
8.74% gross interest in the non-consent interest in two of the three vertical wells; and Kelowna Resources Group formerly known as 0743608 BC Ltd. a company owned by the President of the Company, acquired from Lexaria a
20.79% gross interest in the non-consent interest in the two of the three vertical wells; an advisor to the Company acquired from Lexaria
2.46% gross interest in the non-consent interest in two of the three vertical wells.
The July 29, 2010 agreements were replaced on September 13, 2010, when the Company entered into three separate assignment agreements with Kelowna Resources Group formerly known as 0743608 BC Ltd, solely owned by Director/Officer of the Company; Emerald Atlantic LLC, solely owned by a Director of the Company, and the Senior VP Business Development. (the “Assignees”), whereby the Assignees have paid a fee of $408,116
to earn a
24% share of the Company’s gross non-perpetual
32% interest in the three oil wells being drilled in Wilkinson County, Mississippi. As a result of the three assignment agreements, Lexaria receives at no cost to the company, a carried interest of
8% in these same rights and benefits. The Company assigns, transfers and sets over to the Assignees, all proportionate rights, interest and benefits in the Assigned Non Perpetual Interest held by or granted to the Assignor in and to the Participation Agreement between the Company and Griffin but limited to a gross
500% revenue payout based on the total amount paid under the Initial Consideration and the Subsequent Consideration after which all rights, interests and benefits cease.
Lexaria entered into an Asset Purchase Agreement dated August 12, 2011, with Brinx Resources Ltd. to acquire
100% of its
10% gross working interest in the oil and gas interests located in Mississippi, USA. By acquiring the additional
10% working interest in Belmont Lake oil and gas field, Lexaria then had
42% working interest in Belmont Lake and retains its existing
60% working interest in the exploration wells on approximately
130,000
acres surrounding Belmont Lake in all directions.
Lexaria has agreed to considerations as follows;
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1. |
$200,000
on the August 12, 2011 (the "Initial Payment") (paid), and
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$200,000
on or before November 12, 2011; or interim payments, as agreed, in the amount of $10,000
per month for up to
3
months following November 12, 2011 with the remaining balance of $200,000
then due and payable (the "Final Payment"), and, should Lexaria not make the final payment on February 12, 2011 a penalty of $500
per day (the “Penalty Payments”) beginning one day after February 12, 2011 and accruing until the balance of the $200,000
Final Payment is made to the Vendor. Both the Vendor and the Purchaser agreed that, should any Penalty Payments be due, such Penalty Payments are not deductible from the balance of the $200,000
Final Payment. As at April 30, 2012, the Company has paid $230,000, including the Final Payment.
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3. |
800,000
shares of restricted common stock issued from Lexaria treasury were issued on August 12, 2011.
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On November 1, 2013, Lexaria Corp. (the “Company”) entered into three separate assignment agreements with CAB Financial Services Ltd. solely owned by a Director/Officer of the Company; Emerald Atlantic LLC, solely owned by a Director of the Company, and a third party. (the “Assignees”), whereby the Assignees have paid a fee of US$305,894
to earn a
28.68% share of the Company’s perpetual
42% interest in a proposed 12-7 oil well to be drilled in Wilkinson County, Mississippi. As a result of the three assignment agreements, Lexaria receives a carried interest of
13.32% in these same rights and benefits. The Company assigns and transfers over to the Assignees, all proportionate rights, interest and benefits in the Assigned Perpetual Interest held by or granted to the Assignor in and to the Participation Agreement between the Company and Griffin.
As of January 31, 2013, additional expenditures of $25,000
were incurred for workovers.
As of January 31, 2014, the Company’s working interest and production in PPF-12-4 and PPF-12-5 well located at Belmont Lake, Mississippi, with carrying values of $1,000,000, are used as security for the convertible debentures issued on November 30, 2010, December 16, 2010 and December 1, 2011 (see note 7 (b) and (c), with aggregate amount of $820,000.
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