Under the terms of the Amended and Restated Participation Agreement between Allan Campbell and Thomas E. Knowlton dated 24 August 2009 and a Deed of Acknowledgement between Allan Campbell and Lucas dated 30 September 2009, Lucas has an indirect contractual interest in 10% of a net profit interest earned by Thomas Knowlton from net production proceeds and net sales proceeds generated in respect of oil and gas leasehold interests in lands within an area of mutual interest, the Monument Prospect located in Trinity County, Texas (Net Profit Interest). The Net Profit Interest does not constitute a property interest of Lucas.
The area of mutual interest covers an area approximately 27 miles long and 7 miles wide which contains approximately 120,000 gross acres. There are approximately 62,560 leased net acres within the area of mutual interest. The Company has been informed by Mr Knowlton that he has transferred the approximately 62,560 leasehold net acres in the area of mutual interest to an affiliate of Mr Knowlton, TEKXON Onshore Oil & Gas, LLC (TEKXON) for non-cash consideration on an arm’s length basis. In the event that the non-cash consideration is monetised, 10% of that will form part of the Net Profit Interest of Lucas. However, the Company has not been provided with information of the nature or value of the non-cash interest paid by TEKXON to Mr Knowlton or when it is likely to be monetised. The Company understands that TEKXON is in the process of raising final funding to conduct a drilling program in the area of mutual interest. The Company has been informed that a permit to drill the first well, the Pyle Gas Unit #1 well, has been awarded to TEXKXON.