Montana Exploration Corp. has signed an agreement with a major regional Utility, to farm-in on approximately 315,000 acres in Blaine and Hill Counties in the State of Montana. Much of this acreage is held by production by shallow gas zones, where deeper targets have been significantly under-exploited.

Pursuant to the Agreement, the company will drill Eagle gas wells to produce gas that will be sold to the Utility, and the company will also explore and develop other oil and gas zones, including conventional Shaunavon oil. Under the terms of the Agreement, the company effectively becomes the drilling partner of the Utility, and is required to drill a minimum of ten wells throughout the farm out acreage within 24 months, of which at least six must be shallow Eagle gas wells. Following the Initial Drilling Program, the Company can continue to drill throughout the farmout acreage as long as each new well is spudded within 90 days of completion of the prior well.

The company will pay 100% of all initial drilling and completion costs in exchange for a 100% working interest subject to a 6.25% overriding royalty in the spacing unit of the well before payout of the well and a 75% working interest after pay out. For each non-unitized well drilled, the Company will earn a 75% working interest in between 8 and 15 additional contiguous sections, depending on the depth drilled, Eagle wells are drilled to approximately 1,200 feet and Shaunavon wells are drilled to 4,200 feet.