Tri-Valley Corporation (NYSE Amex: TIV) today announced a favorable settlement of lease termination litigation brought in 2009 by the lessors of its Lenox Ranch oil and gas leases located in its Pleasant Valley oil sands project near Oxnard, California. Under the terms of the settlement agreement signed on February 22, 2011, the primary term of the leases has been extended by three years until May 1, 2014. The settlement agreement also extends to May 1, 2013 a requirement to drill a new exploration well below a depth of 6,000 feet, and it removes a previous requirement for Tri-Valley to relinquish the oil and gas rights below 6,000 feet if commercial production is not established by May 1, 2013. In addition, the lessors have waived payment of their 2009 and 2010 annual surface rentals and minimum royalties.
Tri-Valley also provided an update on its initiative to expand oil production at its Claflin project in the Edison Oil Field, near Bakersfield, California. The Company expects to commence permit work early next month as part of its previously announced 3-D seismic study of the Claflin and Brea leases, with seismic recording to follow in late March or early April. The 3-D seismic program will allow the Company to optimize its development drilling on the leases which will include some horizontal wells. With the current tight drilling rig market, Tri-Valley is working to secure a rig to commence drilling the first of five wells in early April which could allow oil production from the new wells to start by June 2011.
“The favorable litigation settlement on the Lenox property preserves an important opportunity for Tri-Valley and its partners in the Pleasant Valley oil sands project where over $7 million has been invested in the property, including a new horizontal well that was drilled in late 2008,” said Maston N. Cunningham, President and CEO of Tri-Valley Corporation. “We are reviewing plans for start-up of cyclic steam stimulation production from the new well which has been delayed largely due to the litigation that started in 2009.”