Under the agreement, family-owned Hay will earn a 10% interest in the production unit for each well drilled on a well-by-well basis by contributing goods and services during the drilling, completing and equipping each well, Norwest said.

“Hay Exploration is a small but very experienced, successful and cost-conscious operator,” Norwest chief executive officer Joe Salomon said.

"It has direct experience in drilling and production activities in the Appalachians and has developed very good relationships with other operators in the area and the service companies."

The agreement covers the initial drilling of three wells. The first bore should spud within 45 days, depending on rig and crew availability, Salomon said.

The legal title search for each well location in the initial three-well program was also complete and

well site preparations were underway.

The wells would be drilled to about 610 metres and were expected to cost about $US140,000, Salomon said.

Norwest is earning a 70% interest in the Kentucky project from Perth-based Alto Energy's US subsidiary, Golden Triangle Energy Inc (GTE), by paying the costs of the first three wells and carrying GTE through this initial drilling program.

After assignment to Hay and taking account of royalties, Norwest’s net revenue interest (NRI) in the project would be 52.6%, Salomon said.

Norwest, with GTE, currently holds about 13,000 acres under lease in Carter County, Kentucky with the Australian company’s interests held through wholly-owned subsidiary NWE (Appalachians).

Salomon said the company’s other Appalachian projects include a recently completed five-well program in Tennessee (Norwest 37.5%, NRI 29%) where the first well flowed gas at a stabilised rate of 110,000 cubic feet per day.

Another four wells at this site had been drilled and were ready for fracing and testing.

In a third project in West Virginia, three wells would be drilled within the next few months (Norwest 29%, NRI 24%).