EXHIBIT 10.1
 
ASSIGNMENT
OF
FARMOUT INTEREST

THIS ASSIGNMENT is made and entered into, by and between, West Canyon Energy
Corp., also known as PetroSouth Energy Corp. hereinafter collectively referred
to as “Assignor”, and Cobra Oil & Gas Company, hereinafter referred to as
“Assignee”.

WHEREAS, this Assignment concerns and effects a change in ownership of a 25%
interest in and to that certain Farmout Agreement dated February 1, 2008 (FOA
copy attached) by and between Transco Oil & Gas, Inc. (TOG) as Farmor and the
Assignor (set out above) to this Assignment. Assignor is the owner and holder of
a 25% interest in and to the FOA to the “North Semitropic Prospect” (Prospect)
more fully described in the FOA and located in Kern County, California. Assignor
hereby agrees to transfer Assignor’s 25% interest in the FOA to Assignee along
with all rights, benefits and obligations therein stated. Assignee hereby agrees
to accept said 25% interest in the FOA herein assigned along with all rights,
benefits and obligations therein stated. Assignee acknowledges that the drilling
and testing of the Prospect is eminent, and failure to meet cash calls as per
the FOA will result in a loss of interest in the FOA and Prospect. Assignee
states that it has read and fully understands the FOA and hereby accepts same
and agrees to abide by all the terms and conditions therein stated.

WHEREAS, this Assignment is made in accordance with and expressly subject to the
terms and provisions of the FOA and shall become immediately affective upon
execution by both Assignor and Assignee and approval of TOG as Farmor to the FOA
stated above.

NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor does hereby convey, transfer and assign to Assignee all
of Assignor’s right, title and interest in and to the said FOA and Prospect
described above.

 
 

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This Assignment shall inure to and be binding upon the respective successors and
assigns of the parties hereto.

IN WITNESS WHEREOF, this Assignment is executed the day and year as set out
below.

ASSIGNOR:
Dated:  16 June 2008
West Canyon Energy Corp.
(aka PetroSouth Energy Corp.)
ASSIGNEE:
Dated:  16 June 2008
Cobra Oil & Gas Company

          By: /s/ Fred B. Zaziski   By: /s/ Massimiliano Pozzoni  

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Fred B. Zaziski - Chairman
20333 State Hwy. 249
Suite 200 - 113
Houston, TX 77070
   

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Max Pozzoni - President
Uptown Center
2100 West Loop South
Suite 900
Houston, TX 77027

 
 
APPROVED by TOG as Farmor:
Dated:  17 June 2008
Transco Oil & Gas, Inc.
 

          By: /s/ Larry J. Messmer        

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Larry J. Messmer - President
11605 Meridian Market View
Unit 124, # 303
Falcon, CO 80831
   

 
 
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Farmout Agreement
 
“North Semitropic Prospect”
 
This Farmout Agreement (“FOA”), when accepted and agreed to by the undersigned
parties, shall set forth the terms, conditions and covenants under which Transco
Oil & Gas, Inc. hereinafter referred to as “Farmor” and those entities listed on
the signature page, hereinafter referred to collectively as “Farmee” shall
pursue the exploration and development of the North Semitropic Prospect Area
(prospect). This is a “Drill to Earn” Farmout Agreement and interest will be
earned in the entire +/-2.390 acre leasehold by Farmee after drilling the
initial test well as set out below. All operations will be conducted in
accordance with the mineral lease agreements. In consideration of the mutual
terms and covenants provided in this FOA, Farmor and Farmee agree as follows:
 

 
1.
Farmor is the owner of certain Oil & Gas Leases covering +/-2,390 net acres
located in Kern County, California and more specifically set out in the attached
Exhibit “A” and the Lease Schedule. This FOA is a binding agreement and is
entered into by the parties concurrently with the industry model form Joint
Operating Agreement (JOA), attached as Exhibit “B” and covering the operations
to be conducted on the North Semitropic Prospect. Execution of this FOA will
serve as constructive execution of the JOA which is attached as Exhibit “B”. The
specific intent of Farmor in granting this Farmout Agreement is to cause the
drilling of the first test well to +/- 14.000' to exploit the productive
potential of two (2) specific target horizons, the fractured Monterey Shale at
+/- 10,000 ft. estimated vertical depth and the Freeman Jewett/Vedder Sand at
+/- 14,000 ft. estimated vertical depth. The operations for drilling and testing
shall be conducted as per the AFE & Drilling Program attached to the JOA as
Exhibit “H” and are subject to change by the Operator.

 

 
2.
Property subject to this FOA is described on Exhibit “A” attached hereto and
hereby made apart of this FOA, as well as the Lease Schedule. Also described on
Exhibit “A” is the Area of Mutual Interest (AMI) between Farmor and Farmee. The
current Net Leasehold Acreage is +/- 2,390. The net leasehold is subject to
updates as additional leases are acquired within the AMI. Subsequent to
executing this FOA and payment of the Prospect Acquisition Fee, Farmee shall be
responsible for its pro-rata share of delay rentals on the leasehold. The
decision to acquire new leases within the AMI shall be by mutual agreement
between Farmor and Farmee. The costs to acquire new leases within the AMI shall
be shared proportionately among Farmee according to interest held in the
Prospect.

 

 
3.
Farmor and Farmee agree that Farmor and/or its assignees including Farmor’s
originating geologist will collectively retain the specified 6% of 8/8ths
Overriding Royalty Interests (ORR!) and 15% Back-In Working Interests (BIWI) as
set out in Exhibit “A”. Said ORRI and BIWI shall cover the current Leaseholds,
future Leaseholds and all Lands within the AMI as set out in the attached
Exhibit “A”. The ORRI shall be free and clear of any and all costs for lease
acquisitions, drilling, completions, operating, re­ works, etc. and shall
receive their specific ORRI percentage of gross revenues based on 100% of
production sales. Farmor’s 15% WI shall have the option, on a well by well
basis, to participate on a follow up well or maintain the 15% BIWI which shall
be on a per well basis and after payout of all new lease acquisitions, hard
drilling & completion costs and well operating costs.

 
 
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4.
Transco Oil & Gas, Inc. or its appointee shall be the initial Operator and win
deliver to the drilling partners (Farmee) a 77.00% Net Revenue Interest (NRI) on
the drill site acreage. Farmee collectively will earn 100% Working Interest in
the first test well Before Pay Out (BPO), to become an 85% Working Interest
After Pay Out (APO) on a per well basis. Farmees collectively, shall be
responsible for 100% of the Prospect acquisition, estimated drilling, testing
and completion cost for the first test well, T.D. +/- 14,000 ft. (Monterey &
FJ/Vedder test).

 

 
5.
Originating Geologist Fee: A fee of $10,000 on follow up wells shall be paid to
Tom Fassio which includes updating all geology/geophysical interpretations based
on new data acquired from previous wells. This fee will also cover well site
geology/geophysics consulting during drilling and completion operations.

 

 
6.
Estimated costs for the first test well.

 
Prospect Acquisition:
$537,750
+/- $225 / acre for GG&L + OH
Drilling 14,000':
1,500,000*
Variable Costs, as per current AFE.
Completion:
900,000*
Completion in FJ/Vedder.
 
$2,937,750
*See attached AFEs, subject to change.
           

 
7.
Should the +/- 14,000' test of the FJ/Vedder result in a dry hole, the well will
be plugged back and based on favorable log evaluations, a completion made in the
fractured Monterey Shale at +1- 10,000'. As per current AFE, the call for
completion in the Monterey Shale will be about $1,100,000 including a +/- 1,000'
horizontal leg.

 

 
8.
Additional Test Wells: An election (drilling commitment) by Farmee for a test
well to evaluate the deep Eocene structure (+/-16,500') must be made within 12
months and spud no longer than 18 months from date of spudding the first test
well as called for herein. Failure by Farmee to elect and spud will result in
deep rights reverting to Farmor and Farmee retaining all rights to 100 ft. below
deepest vertical drill depth.

 

 
9.
The designated Operator will., as soon as practical after full execution of
Agreements covering 100% of the working interest and payment in full of the
Prospect Acquisition Fee, initiate the permitting process and contract for a
drilling rig for a mutually agreeable move in date. The first test well shall be
drilled to +/14,000'.

 
 
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10.
The Prospect Acquisition fee listed above is due and payable to Farmor upon
signing of this FDA. Farmee shall retain that percentage of the Prospect in
relation to the percentage of the Prospect Acquisition Fee paid by Farmee to
Farmor. All subsequent «Cash Calls” by the Operator for the above listed
Drilling & Completion funds as per the latest AFE shall be made following full
execution of this FDA. All Cash Calls for Drilling & Completion funds and/or any
cost overruns are due within 10 days after Operator issues a Cash Call. Failure
to meet a Cash Call for funds as called for herein shall result in Farmee
forfeiting all working interest ownership and previously paid in funds to
Farmor.

 

 
11.
Farmee acknowledges it has reviewed the attached IDA (Exhibit «B''), all
leasehold and technical data to Farmee's satisfaction. Farmee agrees to and
acknowledges that upon execution of this FOA and thereafter, all or any portion
of this Prospect is subject to prior sale until such time as Farmee has paid the
Farmee entire pro-rata share (see signature page) of the Prospect Acquisition
Fee due to Farmor. Farmee further acknowledges that Farmor has granted an option
on at least 25% of the Prospect to another company until March 31, 2008. In the
event of a prior sale any refund of previously paid funds due Farmee shall be
paid to Farmee promptly by Farmor.

 

 
12.
Confidentiality & Representation: Farmee may utilize the displays and exhibits
that Farmor has delivered to Farmee for the purpose of evaluating the Prospect
and facilitating the drilling of the first test well. However, Farmee agrees not
to use Farmor’s name in verbal discussions or on any copies that Farmee intends
to show to any 3rd parties. Farmee agrees that all data relating to the Prospect
is highly proprietary in nature and no copies of said data will be given to 3rd
parties without Farmor's written approval. Farmee agrees that no interests of
any nature in the Prospect will be pledged, conveyed or placed of record without
Farmor's written approval. This FOA, all Prospect data and dealings between
Farmee and Farmor are to be held strictly confidential and not to be disclosed
to any 3rd party without written approval from both parties to this FOA.
Excepting that this FOA may be disclosed to the company that is currently
holding an option on the Prospect which is referred to in paragraph II above.

 

 
13.
Hold Harmless & Indemnification: Farmee, its individual principal officers,
directors and affiliates (Farmee, etal) hereby agree to fully indemnify, defend
and hold harmless Farmor from any and all losses, legal actions and liabilities
of any nature that arise as a result of Farmee, etal discussions or dealings
with any 3rd party with regard to the Prospect. Farmee, etal agrees that the
Prospect shall be kept free and clear of any liens, encumbrances and/or legal
actions so as to allow Farmor the full enjoyment of the Prospect. In the event
the Prospect is clouded as a result of Farmee, etal actions, then Farmee, etal
agrees to individually and corporately stand ready to reimburse Farmor for all
losses and/or expenses incurred to clear Prospect of any and all clouds.

 

 
14.
Prospect Acquisition Fee: It is agreed that Farmee shall pay to Farmor a deposit
of $34,000 toward the Prospect Fee set out below. The balance due shall be paid
to Farmor immediately once 100% of the Prospect is sold. In the event the
Prospect is not fully sold within 90 days from the date below then Farmee may
request and receive a full refund of the deposit.

 
 
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This FOA may be signed in counterparts all constituting a single agreement.
Farmee and Farmor have signed this FOA which will act as constructive execution
of the accompanying JOA (Exhibit “B”). This FOA when signed will become the
governing agreement and will prevail over any conflicts between this FOA and the
JOA.
 

   
Farmor: Transco Oil & Gas, Inc.
         
By:  /s/ Larry J. Messmer 
 
Dated: 1 February 2008
 
Larry J. Messmer - President
7643 McLaughlin Rd., # 215
Falcon, CO 80831
(719) 520-3208 / (719) 635-6181
     
Farmee:
 
WI BPO
WI APO
% of Cost
Prospect Fee
PetroSouth Energy Corp.
             
25%
21.25%
25%
$134,437.50
By: /s/ Fred B. Zaziski  
   
Fred B. Zaziski - Chairman
 
Above percentages and dollars to be adjusted as per exercise of prior sales or
options and proportionate to the amount of the total prospect fee paid by
Farmee.
Print Name & Title
     
Address:
         
20333 State Highway 249, Ste. 200 - 113
Houston, TX 77070
(281) 378-1563 / (281) 271-8600
   
Phone & Fax
   

 
 
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