Unassociated Document


     

    EXHIBIT
      10.1

     

    
      	
              

            	
              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