EXHIBIT 10.1
 
[logox1x1.jpg]
COASTAL PETROLEUM COMPANY
Post Office Box 609 · Apalachicola, FL 32329 Telephone (850) 653-2732
FAX (850) 653-8804

 
May 22, 2008

Max Pozzoni
Cobra Oil & Gas Company
Uptown Center
2100 West Loop South
Suite 900
Houston, Texas 77027

 
Re:
Farmout Including 82,801.38 Net Acres of Coastal Acreage

in Valley County, Montana - Memorandum of Intent

Dear Max,

This Memorandum of Intent (“Memorandum”) outlines the terms and conditions under
which Coastal Petroleum Company (“Coastal”), is willing to enter into a formal
farmout agreement (the “Agreement”) with Cobra Oil & Gas Company (“Cobra”),
collectively hereafter the “parties”, on all of the remaining leases owned by
Coastal located in Valley County, Montana:

 
1.
Coastal has 82,801.38 net acres of leases, (the “Leases”). The Leases are 100%
working interest leases with between 75.5 and 80.5% net revenue interests. A
copy of the Schedule of Leases is attached as Attachment A.

 
2.
Coastal is offering to farmout the Leases to Cobra for: a payment of $180,000 to
Coastal at the time this Memorandum of Intent is executed, granting Cobra the
option right to any time before two years from the date of this Agreement, Cobra
may exercise a right to purchase a 50% interest in the leases for the sum of
$1,000,000, paid as described hereafter. Before the exercise of this right to
purchase, Cobra may elect to drill at its cost any well on the Leases and earn a
50% interest therein. After the election to purchase and payment, either party
may propose wells and the non-participating party would lose any interest in
only the spacing unit for the well in which it did not participate.

 

--------------------------------------------------------------------------------

 

 
3.
Cobra wishes to acquire 100% of the total interests Coastal is offering.

 
4.
In order for Cobra to acquire 100% of the interests Coastal is offering, Cobra
and Coastal agree:

 
A.
At the time this Memorandum of Intent is signed, Cobra shall pay to Coastal the
sum of $180,000. Coastal agrees to immediately pay the June 1, 2008 rentals of
about $126,000 and the $5,000 cost of the geologist’s report.

 
B.
Cobra shall enjoy a right to purchase 50% of the working interest of the Leases
for a period of two years from the date of this Agreement, by agreeing to pay on
Coastal‘s behalf $1,000,000 for Coastal’s 50% share of wells drilled on the
property by the parties. During this option period Cobra may drill any well it
chooses at its cost and earn a 50% working interest in the spacing unit if the
well is a producer, even though it has not exercised its right to purchase 50%
of the working interest. At the time of full payment for the 50% of the working
interest, Coastal shall assign the full 50% undivided working interest in the
Leases to Cobra.

 
5.
Cobra will be under no obligation to drill any well on the property before it
exercises its right to purchase the 50% interest in the leases from Coastal.

 
6.
The form for the Joint Operating Agreement, Attachment B, shall be the model for
each well drilled under the Agreement. Of course, if either party drills a well
on its own, without the participation of the other, that party could operate
that well.

 
7.
An Area of Mutual Interest (AMI) shall exist within four miles of the Leases,
excluding the acreage and AMI within the Starbuck East agreement assigned to
another corporation. Each party shall offer to the other party the right to
participate for its current share of the interest in the Leases in the
acquisition of any lease or other interest that party may have the option to
acquire, at the same percentage of the cost of acquisition. In the event that
the other party declines to participate, then that lease or other interest shall
become outside this AMI and the other party shall have no interest under the AMI
rights. A party may propose geological investigations of whatever character
within the AMI, and that party shall offer to the other party the right to
participate in the costs and results of the proposed geological investigation.
In the event that the other party declines to participate, then that party shall
have no right to the information and data from the geological investigation.
However, declining to participate in the geological investigation shall not
affect that party’s right to participate in any well proposed by the party.

 

--------------------------------------------------------------------------------

 

 
8.
A Formal Agreement shall be completed and executed by the parties hereto within
ten (10) days of the date of this Memorandum of Intent.

If the terms and conditions of this Memorandum of Intent are acceptable to you,
please indicate your agreement by executing the statement below on each of the
two originals of this Memorandum. Please return one of the signed originals.

       
   
  Sincerely, 
  /s/ Robert J. Angerer, Sr.  

--------------------------------------------------------------------------------

Robert J. Angerer, Sr.   Chairman of the Board

 
 
Cobra Oil & Gas Company agrees with the foregoing terms and conditions of this
Memorandum of Intent.

            /s/ Max Pozzoni  

--------------------------------------------------------------------------------

Max Pozzoni   President

 

--------------------------------------------------------------------------------