Under the agreement, Emerald would earn 80% working interest for payment of the drilling campaign and completion costs of each well.

About 130 drilling locations in the lease areas have been identified along with an existing discovery well in Kentucky.

Emerald would initially concentrate on natural gas drilling in eastern Kentucky and West Virginia where P&J holds most of its leases.

Potential producing zones include the Mississippian Berea Sandstone, the Devonian Shales including the Marcellus, the Silurian Big 6 sandstone and the Ordovician Trenton/Black River.

According to Emerald, the potential producing zones could lead to more than 2000 wells on the leases.

Numerous wells in this basin have produced for up to 60 years and are still producing at economic rates, Emerald said.

"Assuming an ultimate recovery of 0.5 billion cubic feet of gas for a minimum of 1000 wells, the potential resource could be as much as 500 billion cubic feet of gas," the company added.

The existing Kentucky well will be completed this week followed by the drilling of the first West Virginia well.