Unassociated Document


    

      
        International
          Frontier Resources Corporation

      

       

      November
        23, 2005

      


      Eternal
        Energy Corp.

      Attention:
        Mr. Brad Colby

      


      Via:
        Email

      


      Dear
        Brad, 

      


      Re:
        Farmout Offer - UKCS Quad 14

      


      Further
        to our recent discussions this letter agreement will set forth the basic
        terms
        and conditions of International Frontier Resources Corporation (“IFR”) offer to
        Eternal Energy Corp. (“EEC”) to farmin on UKCS Quad 14, blocks 14/23 (SE/4)
        14/28a and 14/29b (255 sq km) herein after referred to as “Quad 14
        acreage”.

      


      Quad
        14 - Background

      


      The
        Quad
        14 acreage has been, or is in the process of, being converted to a traditional
        license from a promote license. In our discussion you indicated that EEC
        is
        interested in participating in the drilling a commitment well on the Quad
        14
        acreage. In this regard IFR advises as follows; 

      


      
        	 	
                ·

              	
                The
                  license is currently held Palace Exploration UK - 90% and Challenger
                  Minerals - 10%. The Quad 14 acreage is subject to a 3% royalty
                  payable to
                  Walter Oil & Gas UK. 

              


      

      


      
        	 	
                ·

              	
                IFR
                  and Palace have entered into an agreement under the terms of which
                  IFR has
                  the right to acquire up to a 40% interest in the Quad 14
                  acreage.

              


      

      


      
        	 	
                ·

              	
                Palace
                  shall seek DTI approval to register the IFR interest in the Quad
                  14
                  acreage on title. 

              


      

      


      
        	 	
                ·

              	
                Palace
                  and Challenger own a 3-D seismic survey over the Quad 14 acreage.
                  The 3-D
                  survey is owned Palace/Challenger -50% and Encana, now Nexen, 50%.
                  The
                  cost for IFR to purchase a copy of the 3-D seismic is US$9,000
                  per point.
                  

              


      

      


      
        	 	
                ·

              	
                Challenger
                  has been appointed operator and Challenger will contract ADTI to
                  drill the
                  first well on the Quad 14 acreage on a turn key basis at an estimated
                  D&A cost of USD$10 million. For clarity ADTI will act as drilling
                  operator and will drill the test well to contract depth and acquire
                  logs
                  for an estimated turn key cost of US$10 million.
                  

              


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	 	
                ·

              	
                Palace
                  is prepared to participate for up to a 50% interest and Challenger
                  will
                  participate for 10% of the cost to drill the commitment well on
                  the Quad
                  14 acreage.

              


      

      


      
        	 	
                ·

              	
                Should
                  the DTI accept Palace’s request for a traditional license Palace will be
                  required to drill one firm well on the Quad 14 acreage within two
                  years
                  from the date a traditional license is issued.


              


      

      


      IFR
        is
        prepared to farmout 15% of the Quad 14 commitment well under the following
        terms
        and conditions;


      


      
        	 	
                1.

              	
                On
                  or before January 5, 2006 EEC shall place US$90,000.00 in an escrow
                  account at Tupper Jonsson & Yeadon offices in Vancouver BC. In the
                  event EEC completes the farmin transaction contemplated in clause
                  2 hereof
                  the escrow funds shall be paid to Palace Exploration UK as payment
                  for 10%
                  of the 3-D seismic costs (US$9,000 X
                  10).

              


      

      


      
        	 	
                2.

              	
                On
                  or before February 5, 2006 EEC shall provide an irrevocable letter
                  of
                  credit for US$1,500,000.00 in favor of Palace Exploration (UK)
                  Limited in
                  trust with Tupper Jonsson & Yeadon. This amount represents 15% of the
                  estimated turn key dry hole costs of US$10,000,000.00. In the event
                  EEC
                  does not provide a letter of credit in the amount of US$1,500,000.00
                  on or
                  before February 5, 2006 the escrow funds of $US90,000.00 referred
                  to in
                  clause 1 hereof shall be released from escrow and paid to IFR as
                  a non
                  performance penalty and EEC shall have no further rights under
                  this
                  agreement.

              


      

      


      
        	 	
                3.

              	
                EEC
                  agrees to pay 15% of the commitment well D&A turn key costs, estimated
                  at US$10 million, 15% of the production testing costs estimated
                  at US$1
                  million per drill stem test and 15% of all completion and all other
                  costs
                  incurred to the flow line outlet valve to earn a 10% interest in
                  the Quad
                  14 acreage. 

              


      

      


      
        	 	
                4.

              	
                EEC
                  agrees to pay its 10% share of a 3% GORR payable to Walter Oil
& Gas
                  UK. 

              


      

      


      
        	 	
                5.

              	
                EEC
                  agrees to be bound by the terms and conditions of the IFR - Palace
                  farmin
                  agreement and Joint Operating
                  Agreement.

              


      

      


      
        	 	
                6.

              	
                EEC
                  agrees to pay its 10% share of the annual traditional license fees
                  from
                  February 5th,
                  2006 onward. 

              


      

      


      
        	 	
                7.

              	
                EEC
                  agrees to keep the terms of this letter agreement confidential
                  unless
                  required to disclose pursuant to regulatory authorities rules and
                  regulations. 

              


      

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      
        	 	
                8.

              	
                EEC
                  will provide IFR and Palace with a copy of any public announcement
                  prior
                  to issuance. 

              


      

      


      
        	 	
                9.

              	
                The
                  parties hereto agree to execute any future documentation required,
                  including a formal Farmin and Joint Operating Agreement to effect
                  the
                  terms and conditions contained herein.


              


      

      


      
        	 	
                10.

              	
                IFR
                  shall use its best efforts to have EEC novated into the Joint Operating
                  Agreement.

              


      

      


      
        	 	
                11.

              	
                IFR
                  shall use its best efforts to have EEC recognized on title by the
                  DTI, in
                  the event EEC is not recognized by the DTI then IFR and EEC shall
                  enter
                  into a mutually acceptable title Trust Agreement.
                  

              


      

       

      


      This
        offer is open for your acceptance until December 1, 2005, by signing and
        returning a copy of this letter by fax to 403-215-2788. Upon execution of
        this
        letter agreement the parties hereto agree to enter into a mutually acceptable
        formal agreement incorporating the basic terms and conditions contained herein.
        


      


      


      Yours
        truly, 

       

      /s/
        Pat Boswell

      Pat
        Boswell

      President
        

      


      


      Agreed
        to
        and accepted this 29th day of November, 2005

      


       

      Per:
        /s/
        Bradley M. Colby

      Eternal
        Energy Corp.