Exhibit
      10.17

     

    CERTAIN
      INFORMATION (INDICATED BY ASTERISKS) IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
      SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT
      HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

     

    


      


      

      


      October
        15, 2006

      


      


      
        	
                Fairway
                  Exploration LLC.

                27981
                  Man O War Trail

                Evergreen,
                  CO 80439

                Attn:
                  Mr.
                  Steve Swanson

              	
                0770890
                  B.C. Ltd

                Suite
                  1003, 409 Granville Street

                Vancouver,
                  BC V6C 1T2

              
	
                 

                Prospector
                  Oil, Inc.

                2812
                  First Avenue North, Suite 307

                Billings,
                  MT 59101

                Attn:
                  Mr. Richard “Dick” Findley

              	 


      

       

      RE: Pebble
        Beach Prospect Acquisition Agreement

      


      Gentlemen:

      


      Eternal
        Energy Corp. (“EERG”)
        and
        0770890 B.C. Ltd (“Newco”)
        hereby
        offer to purchase all right, title and interest of Fairway Exploration LLC
        (“Fairway”)
        in
        the
        captioned prospect in Western Canada outlined on a schedule identified as
        Exhibit “A” which has been delivered herewith, initialed by the signatories to
        this Agreement for reference and which forms a part hereof but which is not
        attached for reasons of confidentiality, (the “Prospect”)
        subject to the following terms and conditions. EERG, Newco, Prospector Oil,
        Inc.
        (“POI”)
        and
        Fairway may sometimes be referred to herein collectively as the “Parties.” In
        consideration of the mutual agreements contained herein, the Parties agree
        as
        follows:

      


      1) Fairway
        hereby agrees to sell all right, title and interest in and to the Prospect
        as
        outlined on Exhibit A to EERG and Newco. The Parties acknowledge that Fairway
        engaged the services of POI to assist Fairway in analyzing the logs and other
        data respecting the Prospect and that POI has intimate knowledge of the
        Prospect. Each of Fairway and POI hereby represents and warrants to EERG
        and
        Newco that it has not disclosed the Prospect to any third parties, recommended
        to any third parties that they submit a bid in connection with the Sale (as
        defined in section 3 below) or in connection with the sale of any lands in
        the
        area of the lands which are the subject of the Sale. Fairway and POI further
        represent and warrant that they are working and will work exclusively with
        the
        Parties hereto during the term hereof and they are not participating with
        any
        other parties directly or indirectly to submit a bid in connection with the
        Sale. In conjunction therewith, Fairway agrees to provide, no later than
        January
        1, 2007, EERG and Newco each with one digital copy and two hard copy sets
        of the
        following information:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        Fairway
          Exploration, LLC

        October
          15, 2006

        Page
          2
of
          6

        
 

      

      
        	 	
                ·

              	
                Prospect
                  maps including, but not limited to, isopach maps of the potential
                  pay zone
                  and underlying formations, net porosity maps and resistivity maps
                  of the
                  potential pay zones defining the prospective limits and a map of
                  available
                  leasehold.

              


      

       

      
        	 	
                ·

              	
                All
                  logs of every well penetrating the prospective zone of interest
                  copied
                  from the top of the [***].

              


      

      


      
        	 	
                ·

              	
                Well
                  tickets for every well penetrating the prospective zone of
                  interest.

              


      

      


      
        	 	
                ·

              	
                Various
                  cross sections documenting the regional facies distributions of
                  the
                  prospective pay zone throughout the Prospect as outlined on Exhibit
                  A.

              


      

      


      
        	 	
                ·

              	
                Maps,
                  logs and data documenting the [***]
                  as
                  a similar analog to the Prospect.

              


      

      


      
        	 	
                ·

              	
                Scoping
                  economics for the Prospect.

              


      

      


      
        	 	
                ·

              	
                Detailed
                  geologic writeup of the Prospect.

              


      

      


      
        	 	
                ·

              	
                Copies
                  of various literature documenting other [***]
                  producing fields and other possible analog fields from around the
                  world.

              


      

      


      The
        intent is for Fairway to deliver to EERG any and all materials necessary
        to
        fully document the Prospect in order to best develop an exploration and
        development strategy and to be able to provide same to any interested potential
        new partners or investors.

      


      2) Fairway,
        in conjunction with EERG and Newco, will provide maps and data as necessary
        to
        facilitate the nomination of an additional 200,000 acres for licensing at
        the
        February 2007 land sale by the Province identified in Exhibit “A” with respect
        to lands falling within the Prospect area set out in Exhibit “A”. The parties
        hereto acknowledge that such nominations must be made prior to October 25,
        2006.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        Fairway
          Exploration, LLC

        October
          15, 2006

        Page 3
          of
          6

      

      
 

      
        	 	
                3)

              	
                In
                  consideration for the above, EERG, Newco, and their successors
                  or assigns,
                  agree to: 

              


      

      


      
        	 	
                ·

              	
                Pay
                  Fairway the sum of US Two Hundred Fifty Thousand Dollars (US$250,000.00)
                  as an initial prospect fee. This initial fee has already been paid
                  to
                  Fairway by or on behalf of EERG;
                  and

              


      

      


      
        	 	
                ·

              	
                Make
                  a minimum bid or cause a minimum bid to be made of CDN$100 per
                  acre for a
                  License Block to be identified in writing and a minimum of CDN$25
                  per acre
                  for a second License Block to be identified in writing at the October
                  17,
                  2006 lease sale to be held by the province identified in Exhibit
“A” (the
                  “Sale”).
                  In the event EERG, Newco or, any of their assignees, are the successful
                  bidders on either or both of the Licenses described above, EERG
                  and Newco
                  further agree:

              


      

      


      
        	 	
                ·

              	
                to
                  pay Fairway an additional US Two Hundred Fifty Thousand Dollars
                  (US$250,000.00) as an additional prospect fee on or before October
                  24,
                  2006.

              


      

      


      
        	 	
                ·

              	
                during
                  the term hereof, to pay Fairway a fee of US$5 per net acre for
                  any
                  Prospect acreage acquired by, or on behalf of, EERG and Newco,
                  or their
                  successors and assignees, which is in addition to the two Licenses
                  described above.

              


      

      


      
        	 	
                ·

              	
                to
                  assign, or to provide, to Fairway a proportionate five percent
                  (5%)
                  overriding royalty interest on all acreage acquired in the Prospect.
                  The
                  5% overriding royalty interest will be payable on the first 100,000
                  barrels of gross production; thereafter, the 5% overriding royalty
                  interest will be reduced to a proportionate three (3%) overriding
                  royalty
                  interest on all future production. The override will be calculated
                  on a
                  well-by-well basis.

              


      

      


      
        	 	
                ·

              	
                to
                  assign, or to provide, to POI a proportionate two percent (2%)
                  overriding
                  royalty interest on all acreage acquired in the Prospect. The 2%
                  overriding royalty interest will be payable on the first 100,000
                  barrels
                  of gross production; thereafter, the 2% overriding royalty interest
                  will
                  be reduced to a proportionate one percent (1%) overriding royalty
                  interest
                  on all future production. The override will be calculated on a
                  well-by-well basis.

              


      

      


      
        	 	
                ·

              	
                In
                  the event EERG and Newco or any of their successors or assignees
                  are not
                  the successful bidders on either or both of the licenses described
                  above,
                  but subsequently acquire a license within the AMI, EERG and Newco
                  agree to
                  pay Fairway an additional US Two Hundred Fifty Thousand Dollars
                  (US$250,000.00) as a one-time only additional prospect fee. This
                  additional prospect fee shall be paid within one week of said
                  acquisition.

              


      

      


      
        	 	
                4)

              	
                The
                  effective date of this agreement is set out on the first page of
                  this
                  agreement. The term of this agreement will be for a period of seven
                  (7)
                  years from the effective date.

              


      

      


      Fairway
        and POI agree to provide consulting services to EERG and Newco (or a U.S.
        subsidiary to be incorporated by it (“US
        Subco”) during
        the first two years of this agreement as reasonably requested by EERG and
        Newco/Subco to support the exploration and development of the Prospect. In
        this
        regard, Fairway and POI each agree to provide a minimum of forty (40) hours
        per
        month, if so requested, at no charge to EERG and Newco/Subco or their successors
        or assigns. In the event Fairway and POI are requested to provide consulting
        services for more than forty (40) hours per month, Fairway and POI will be
        entitled to a consulting rate of US$700.00 per day. Any consulting requested
        by
        EERG and Newco/Subco in excess of forty (40) hours per month will be by the
        mutual consent of the Parties. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        Fairway
          Exploration, LLC

        October
          15, 2006

        Page
          4
of
          6

      

      
 

      In
        conjunction with Fairway’s agreement to sell its interest in the Prospect to
        EERG and Newco, EERG and Newco agree to jointly develop the Prospect for
        the
        benefit of the Parties subject to the following general terms and
        conditions:

      


      
        	 	
                1.

              	
                Newco
                  has been established for the sole purpose of acquiring the PNG
                  rights to
                  the lands comprising the Prospect and developing the Prospect.
                  One hundred
                  percent (100%) of the working interest in the Prospect will be
                  owned by
                  Newco as registered and beneficial
                  owner.

              


      

      


      
        	 	
                2.

              	
                Newco
                  agrees to pay one hundred percent (100%) of all the fees payable
                  to
                  Fairway as set forth above. Newco agrees to reimburse EERG for
                  the US$250,000
                  refundable deposit, previously paid by, or on behalf of, EERG.
                  Such
                  reimbursement will be made by Newco upon execution of this
                  agreement.

              


      

      


      
        	 	
                3.

              	
                Newco
                  agrees to pay to EERG a fee of CDN$882,000 in connection with arranging
                  the transactions contemplated by this Agreement. The fee shall
                  be
                  convertible at the option of EERG into non-assessable common shares
                  of
                  Newco such that the number of shares issuable to EERG on full conversion
                  will constitute fifteen per cent (15%) of the issued and outstanding
                  common shares of Newco calculated on a fully diluted basis after
                  giving
                  effect to Newco’s initial financing of CDN$5,000,000, whether such
                  financing is by way of equity or convertible debt financing or
                  a
                  combination thereof; provided that the issue price or conversion
                  price, as
                  the case may be, shall not be less than the conversion price of
                  EERG’s
                  fee. Newco shall pay interest at the rate of 10% per annum on the
                  fee,
                  which interest shall be accrued and shall be due and payable on
                  conversion
                  or payment of the fee. EERG agrees that it shall not demand payment
                  of the
                  fee for a period of six (6) months or until there is a change of
                  control
                  of Newco other than as a result of one or more financings. The
                  CDN$5,000,000 financing raised by Newco will be used, all or in
                  part, to
                  bid, as set forth above, at the upcoming Sale and as general working
                  capital to run the business of Newco. It is understood and agreed
                  by the
                  Parties that all future financings will proportionately dilute
                  all of the
                  security holders of Newco. 

              


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        Fairway
          Exploration, LLC

        October
          15, 2006

        Page
          5
of
          6


      

      
        	 	
                4.

              	
                EERG
                  will be granted a five percent (5%) overriding royalty on all leases
                  and
                  licenses acquired by Newco, or its successors or assigns, in the
                  Prospect.
                  The override will be calculated on a well-by-well
                  basis.

              


      

      


      
        	 	
                5.

              	
                EERG
                  will be paid, by Newco or its successors or assigns, a “spud fee” in the
                  amount of US$250,000 for each of the first eight (8) test wells
                  (or
                  re-entries) drilled on the Prospect in order to evaluate the geologic
                  concept as presented by Fairway.

              


      

      


      
        	 	
                6.

              	
                If
                  the party or parties involved in providing financing to Newco do
                  so on a
                  convertible loan basis but request that the shares of Newco be
                  issued to
                  them at a nominal price of $0.01 per share in order to reflect
                  their
                  proportionate interests and to maintain voting control of Newco,
                  Newco
                  will also issue a proportionate number of shares to EERG (the
                  “Shares”)
                  at the same nominal price to reflect EERG’s interest by way of the
                  convertible fee (which, pursuant to section 3 above, will initially
                  be
                  fifteen percent (15%) based on a financing of $5,000,000 and will
                  be
                  diluted as additional financing is provided). In the event the
                  Prospect is
                  subsequently deemed to be non prospective by all the Parties, EERG
                  agrees
                  to reassign, sell and transfer the shares to Newco at EERG’s original
                  nominal cost. ,

              


      

      


      As
        previously discussed, Newco and Mr. Colby hereby agree to negotiate a separate
        mutually acceptable consulting agreement providing for Mr. Colby’s management of
        Newco and the exploration and development of the Prospect. 

      


      This
        agreement contains the entire understanding of the Parties with respect to
        the
        subject matter hereof and will supersede and replace any and all prior
        understandings and agreements. No Party may assign this Agreement without
        the
        prior written consent of all Parties. This Agreement will enure to the benefit
        of and be binding on the parties and their respective successors and permitted
        assigns.

      


      If
        you
        agree to the foregoing terms and conditions, please so indicate by signing
        in
        the space provided below and returning one (1) originally signed duplicate
        of
        this letter to 

      Brad
        Colby at the letterhead address. This agreement may be executed in counterparts
        and delivered by hand, courier, mail, fax or scanned email, which will
        constitute effective execution and delivery. 

      


      


       

      (Rest
        of
        this page left blank intentionally blank. Agreement continues on next
        page)

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        Fairway
          Exploration, LLC

        October
          15, 2006

        Page
          6
of
          6

      

      
 

      Should
        you have any questions, please contact Brad Colby at (303) 385-1230. Thank
        you
        in advance for your prompt reply.

      


      Sincerely,

      


      Eternal
        Energy Corp.

      


      


      /s/
        BRAD COLBY

      


      Brad
        Colby

      President


      


      


      Agreed
        to
        and accepted as of the date first above written

      


      


      
        	
                Fairway
                  Exploration LLC.

                 

                 

                By:
                  /s/
                  STEVE
                  SWANSON                       
                  

                Steve
                  Swanson

              	
                0770890
                  B.C. Ltd

                 

                 

                By:
                  /s/
                  GERALD
                  SHIELDS               

              
	
                 

                Prospector
                  Oil, Inc.

                 

                 

                By:/s/
                  RICHARD L.
                  FINDLEY                

                Richard
                  L. “Dick” Findley