UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of Earliest Event Reported): October 6,
2006
TRUE
NORTH ENERGY CORPORATION
(Exact
name of registrant as specified in its charter)
|
Nevada
|
|
000-51519
|
|
98-043482
|
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S.
Employer Identification No.)
|
|
2
Allen Center, 1200 Smith Street
|
|
|
|
16th
Floor, Houston, Texas
|
|
77002
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|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(713)
353-3948
(Registrant’s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
ITEM
1.01 ENTRY INTO A MATERIAL AGREEMENT
On
October 6, 2006 we entered into a development agreement (the “Development
Agreement”), made effective as of October 1, 2006, with BP America Production
Company (“BP”) respecting our participation in the drilling of a test well to a
targeted depth of approximately 21,000 feet (the “Initial Well”) to test the
Tuscaloosa B-1 Sand on the O. Jarreau Heirs No. 1 well located in Pointe Coupee
Parish, Louisiana. Thereunder, we are obligated to pay BP 16.67% of the drilling
costs of the Initial Well regardless of whether the Initial Well is successfully
drilled to the objective depth. BP has estimated that the drilling costs for
the
Initial Well will be approximately $15,700,000. Our proportionate share of
such
estimated drilling costs is $2,617,190 which was paid by us upon execution
of
the Development Agreement. In consideration of the foregoing, we will have
the
right to earn a 12.5% working interest, as discussed in greater detail
below.
When
and
if the casing point is reached on the Initial Well, BP shall provide us with
written notice thereof. Such notice shall state whether BP proposes to attempt
to complete the Initial Well as a producer, whether to the objective depth
or in
a shallower zone, or to abandon the Initial Well as a dry hole. If BP proposes
to complete the Initial Well as a producer, such notice will also include an
authority for expenditure (“AFE”), which will include, at a minimum, an estimate
of completion costs for the Initial Well. Upon receipt thereof, we will have
48
hours to elect to participate therein. If we timely elect to participate, we
will pay 12.5% of the costs of any newly acquired surface equipment associated
with the Initial Well beyond the wellhead connections. If
the
completion attempt results in the production of oil and/or gas in commercial
quantities, BP will serve as operator for the Initial Well.
If
BP
does not drill the Initial Well to the objective depth, we will have the right,
but not the obligation, for a period of one year from the date the drilling
rig
used to drill the Initial Well is removed from the site location for the Initial
Well, to participate in the drilling of a substitute well. BP has no obligation
to drill a substitute well and we have no right to propose the drilling thereof.
If BP proposes to drill a substitute well and we timely elect to participate
therein, such substitute well shall be treated for purposes of the Development
Agreement as the Initial Well and we will be obligated to pay 16.67% of the
drilling costs for such substitute well.
When
and if the Initial Well is drilled to the objective depth or, if applicable,
a shallower depth, and successfully completed as a well capable of producing
oil and/or gas in commercial quantities, BP shall assign to us a 12.5% working
interest in the Initial Well (10% working interest after payout) and a 12.5%
interest (10% interest after payout) in BP’s interests (the “BP
Interest”) in certain related leases and BP’s right to obtain, acquire
or otherwise earn certain interests related to the contract area which covers
an area of approximately 2,500 acres. These assignments will be limited as to
those depths between the surface and the stratigraphic equivalent of the base
of the objective zone (the “Earned Zone”).
BP
has
the right, but not the obligation, at any time after we earn our proportionate
share in the BP Interests, to propose and drill an additional well to a proposed
depth deeper than the base of the Earned Zone (a “Deep Test Well”). In such
instance, BP will provide us with an AFE for the Deep Test Well. Thereafter,
we
will have thirty (30) days to elect to participate therein. Our
participation
will require us to pay 16.67% of the drilling costs in such Deep Test Well
to
the casing point, 12.5% of the completion costs associated with the Deep Test
Well and 12.5% of any newly acquired surface equipment associated with the
Deep
Test Well beyond the wellhead connections. If the completion attempt results
in
the production of oil and/or gas in commercial quantities, BP will serve as
operator for the Deep Test Well.
Drilling
has commenced on the Initial Well and is nearing the objective depth. The well
is expected to be logged within the next three weeks. Shortly thereafter, we
expect to be able to determine whether the Initial Well is commercially viable.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibits
filed as part of this Report are as follows:
Exhibit
10.1 Development
Agreement effective as of October 1, 2006 between Registrant and BP America
Production Company.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly cause this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
TRUE
NORTH ENERGY CORPORATION
Dated: October
9, 2006
Name:
John I. Folnovic
Title:
President and Chief Executive Officer