SANTA BARBARA, CA -- (Marketwire) -- 10/30/12 -- Underground Energy Corporation ("Underground", "UGE" or the "Company") (TSX VENTURE: UGE) (OTCQX: UGGYF) is pleased to announce today that it has executed a letter of intent ("Letter Agreement") with Sovereign Resources LLC ("Sovereign" or "SRL") whereby it is proposed that Sovereign will joint venture on and have the right to earn up to a 75% working interest in Underground's and its joint operating partner's interest in 2,857 gross acres of the Northwest corner of the Zaca Field Extension Project ("Zaca") in Santa Barbara County, California (the "Joint Venture Lands"). UGE owns 80% of the leasehold interest in the Joint Venture Lands, and a total 10,482 net acres across its Zaca asset.
Under the terms of the Letter Agreement, Sovereign will enter into a continuous drilling program to drill a maximum of seven wells to earn its full working interest. UGE and its minority partners will be carried for wells one and two, but, thereafter, will have the right, but not the obligation, to pay their share of drilling and related costs for each subsequent well. UGE anticipates drilling to commence within 6 months.
"Sovereign is pleased to joint venture with Underground Energy," said Frederic Sewell, President and CEO of Sovereign. "Based on my knowledge of the local area, Sovereign decided to invest in Zaca by purchasing Towne Exploration Company in 2012 with an adjoining lease on which we have drilled an initial well which we expect to move into production shortly. This joint venture with Underground enables us to move into contiguous acreage and extend our land base further. The Sovereign team and I believe that the upside potential at Zaca is significant and we are excited at the opportunity to unlock its potential in partnership with Underground."
"This joint venture with Sovereign brings in a knowledgeable industry partner for Underground whose interests and expertise complement our development plan at the Zaca Field Extension Project," said Mike Kobler, President and CEO of Underground. "The joint venture provides additional industry validation of the potential of the Zaca asset and the underlying value of our Zaca acreage. It also accelerates development of acreage which is peripheral to our seismic and drilling programs to date, which have focused on the Eastern side of our leased acreage. Underground is looking forward to working in partnership with Sovereign Resources and we continue to be pleased with the high level of industry interest that we are receiving in our assets at Zaca."
TSX Venture Exchange approval has been received for the non-core asset disposition which was announced on October 11, 2012 and, therefore, that agreement will become effective on October 31, 2012.
About Sovereign Resources LLC
Sovereign Resources LLC is located in Dallas, Texas and is currently pursuing projects in Texas and California. Founded in 2008 by Frederic D. Sewell, the company focuses on locating oil and gas properties with major upside potential, and exploiting properties with aggressive workover and/or drilling programs to maximize oil and gas production, cash flow and the property value. Mr. Sewell has 50 years of experience in the oil and gas industry and was previously the co-founder of Netherland, Sewell and Associates, Inc. (NSAI), a prominent, independent petroleum resource assessment and reserve analysis consulting firm.
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