As part of the deal, Anzoil will spend up to $1.4 million on a core hole program and a pilot coal bed methane gas production program in ATP 683P (south east Queensland). Anzoil will earn a 20% interest in a quarter of ATP 683P after contributing a further $1 million towards the cost of the pilot production program.

Arrow told the exchange it will operate both the core hole program and the pilot program and said it expected that the core hole program would be completed within six months and the Pilot Program would be completed eight months after that.

Arrow said the core hole program would consist of a core hole through the entire Walloon Coal Measures section along with permeability testing and desorption testing to determine gas contents on coal samples taken from the cores.

The company said one core hole will be drilled in each of the Dalby, Bowenville and Oakey farmout areas and the core holes in ATP683P will form part of the company's current core hole program. This involves one hole in ATP676P, four holes in ATP683P and one in ATP689P. Arrow also plans to drill a core hole in the Styx Basin - ATP700P - pending granting of the tenement.

In addition to the farmin agreement, Arrow also told the markets it has agreed to place 1.3 million shares with Anzoil at 18 cents per share ($234,000) and 433,333 attaching options exercisable at 20 cents expiring on 28 June.

Arrow also said it would grant Anzoil, or its nominee, a 14 day option to subscribe to the same number of shares and options at 18 cents per share under the same terms.