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
March 1, 2010
Date of Report (Date of earliest event reported)
AMERICAN EXPLORATION CORPORATION
(Exact name of registrant as specified in its charter)
| | Nevada | 333-141060 | 98-0518266 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
407, 2nd St. SW Suite 700 Calgary, Alberta, Canada | | T2P 2Y3 |
| (Address of principal executive offices) | | (Zip Code) |
(403) 233-8484
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K 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)) |
SECTION 1. REGISTRANT’S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Effective on January 15, 2010, the Board of Directors of American Exploration Corporation, a Nevada corporation (the “Company”), authorized the execution of a letter of intent (the “Letter of Intent”) with Avere Energy Inc., a Canadian corporation (“Avere Energy”), regarding the Mississippi project area as described below. Effective on March 1, 2010, the Letter of Intent was amended pertaining to the overall compensation arrangements as further described below (the “Amended Letter of Intent”).
Previously effective September 17, 2009, the Board of Directors of the Company authorized the execution of a letter agreement (the “Letter Agreement”) with Mainland Resources Inc., a Nevada corporation (“Mainland Resources”) to jointly develop contiguous acreage located in Mississippi . In accordance with the terms and provisions of the Letter Agreement: (i) the Company agreed to commit approximately 5,000 net acres and Mainland Resources agreed to commit approximately 8,225 net acres to the project area; (ii) Mainland Resources shall be the operator of the Mississippi Project in accordance with a joint operating agreement (the “Mainland-Guggenheim-American Joint Operating Agreement, which was signed on October 12, 2009”); (iii) Mainland Resources agreed to pay 80% of the initial well drilling and completion costs to earn a 51% working interest in the well and the total pooled mineral leases; and (iv) the Company agreed to to pay 20% of the initital well drilling and completion costs to earn a 49% working interest in the well and the total pooled mineral leases. In further accordance with the terms and provisions of the Joint Operating Agreement, future costs, including drilling and completions, for oil and gas activities will be split on a 51%/49% basis between Mainland Resources and the Company. Guggenheim Energy Opportunities, LLC subsequently entered the partnership, participating for 10% of Mainland Resources’ working interest (8% overall) in the drilling and development of the Mississippi project, to earn a 5.1% net interest.
Therefore, in accordance with the terms and provisions of the Amended Letter of Intent, Avere Energy shall enter into a definitive farm-in agreement with the Company whereby Avere agrees to a farm-in on the Company’s interest in the Missisippi Project by paying 20% of the total well costs (which is 100% of the Company’s capital commitment) to permit Avere Energy to earn a 20% net interest in the Mississippi Project, which is 40.81% of the Company’s working interest (the “Avere Energy Earned Interest’). Simultaneously with execution of the Amended Letter of Intent, Avere Energy shall pay to the Company a $75,000 non-refundable deposit, which may be used by the Company in its sole discretion. At closing, Avere Energy shall make a final payment to the Company in the amount of $1,925,000, subject to TSX Venture Exchange approval. On or before the later of: (i) April 1, 2010; or (ii) the date which is two months prior to the spud of the initial well in the Mississippi Project, Avere Energy shall provide documentation to the Company demonstrating that an additional $2,000,000 raised for the purpose of drilling the Mississippi Project and will be released in accordance with the definitite farm-in agreement and the Mainland-Guggenheim-American Joint Operating Agreement. On or before the later of: (i) May 1, 2010; or (ii) the date which is one month prior to the spud of the initial well in the Mississippi Project, the funds shall be forwarded to the account held by Mainland as operator of the Mississippi Project. Any additional mineral leases acquired within the Mississippi Project area will be offered to Avere Energy at a 20% working interest once Avere Energy has acquired its Earned Interest.
The definitive farm-in agreement and closing of the transactions contemplated thereunder are anticipated to close on March 28, 2010, which closing is subject to the following conditions: (i) execution of a definitive farm-in agreement; (ii) completion of a financing by Avere Energy to raise sufficient funds as described above for the farm-in; and (iii) receipt of the approval of the shareholders of Avere Energy and of the TSX Venture Exchange to the farm-in.
SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro forma Financial Information.
Not applicable.
(c) Shell Company Transaction.
Not applicable.
(d) Exhibits.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | AMERICAN EXPLORATION CORPORATION |
| DATE: March 4, 2010 | /s/ STEVEN HARDING __________________________________ Name: Steven Harding Title: President/Chief Executive Officer |
