Under the terms of the farm-in, Modena will earn a 10% working interest in about 2200 acres (890 hectares) to the drill depth of the farm-in wells from Nuenco, which will retain a 20% working interest.

Modena has paid Nuenco 17% of the approximate financial estimate from Melbourne-headquartered operator Orchard Petroleum to drill Citrus-7 to about 4000 feet (1219m). It has also undertaken to pay 17% of the well costs through to completion of the Citrus-7 well of the first block of the farm-in acreage.

Within 60 days, Modena is obligated to participate in a second test well on the second block of the farm-in acreage to a depth of about 4000ft by paying 17% of the well costs through to completion. Modena has also paid Nuenco for back costs, Nuenco managing director Anthony Kain said.

“The effect of the farm-in is that Nuenco has recouped approximately 80% of the costs it has incurred to drill the Citrus-7 well to about 4000 feet by reducing its working interest from 30% to 20% while retaining a significant working interest in this acreage,” he said.

The Citrus-7 well spudded on January 5 and still being drilled. It is designed to intersect zones of interest in the Pliocene, San Joaquin and Etchegoin formations.

Orchard Petroleum and Nuenco farmed-in to this acreage between the South East Lost Hills project and the Lost Hills oil and gas field in 2006 with the requirement to drill this well on the acreage.

Participants in Citrus-7 are Orchard Petroleum (operator with a 35% stake), Nuenco (30% and farming down to 20%), Modena Resources (currently no equity but earning a 10% interest) and other participants (35%).