Caza Oil & Gas, through its subsidiary Caza Petroleum has entered into a definitive participation agreement with Endeavour International Corporation to participate in a jointly established exploration and development program in the United States. The exploration and development program will primarily focus on Caza's existing onshore acreage position and portfolio of identified opportunities throughout Texas, Louisiana and New Mexico.

Endeavour and Caza are currently finalizing a proposed work program and related budget for the prospects and opportunities which the parties intend to pursue. Endeavour expects to fund the established work program over the next two years, and further expects to participate in up to nine exploration and appraisal wells during 2009.

Under the terms of the Agreement, Endeavour has the right to participate in assets presented to it in its sole discretion. With respect to those assets in which Endeavour elects to participate, Endeavour will fund the acquisition, exploration and appraisal activity costs attributable to Caza's interest in such assets. In consideration for these payments, as well as a program fee of US$3 million per annum to be paid monthly, Endeavour will earn a 75% participating interest in any interest then owned by Caza in any particular asset in which Endeavour elects to participate.

The term of the Agreement will run for two years. However, either party may terminate the Agreement as of the end of each anniversary period by giving 60 days prior written notice. If neither party terminates the Agreement, it shall automatically renew for subsequent one-year periods.

Caza holds interests in approximately 42,000 gross acres throughout Texas, New Mexico and Louisiana. Caza believes this position contains a portfolio of exploration opportunities that fits well with Endeavour's stated strategy of building a strong foundation for growth in its emerging US focus area. The non-producing assets subject to the Agreement relate to approximately 9% of the net book value of the Company's petroleum and equipment assets, which was US$37.1 million as at December 31, 2008. Under terms of the Agreement, Caza will retain 100% interest in all its current production and proven reserves.

John McGoldrick, Executive Chairman of Caza said, "Caza believes that this initiative which combines Endeavour's financial strength, experience and commitment to a common business strategy, with our experienced team and portfolio of opportunities, will produce positive results for both companies over the term of the arrangement. The funding of the selected exploratory and appraisal drilling activities should allow us to accelerate the work program and reduce execution risk.

In addition, Endeavour's program fees will mitigate the ongoing financial risk in our portfolio and reduce cash outflows in Caza, therefore enabling us to maintain a positive cash balance during these difficult market conditions. It's a real win-win deal, and is in line with the strategic options stated in our year-end results announcement."

Tags: Caza Oil & Gas