Farmout and Option Agreement dated September 25, 2006 between Park Place Canada and Patch Energy Inc

DEFINITIONS

Each capitalized term used in this Agreement will have the meaning given to it in the Farmout and Royalty Procedure, and, in addition:

“Area of Mutual Interest” means sections 22, 23, 26 and 27-12-5 W4M;

"Contract Depth" means the drilling of the Test Well to a depth sufficient to adequately test all Mesozoic formations and to penetrate 15 meters into the Mississippian Section or to a total drill depth of 950 meters below Kelly Bushing subsurface or whichever first occurs;

“Farmee” means Park Place and Patch as to a 50% interest each;

“Farmor” means Pine;

“Farmout and Royalty Procedure” means the 1997 CAPL Farmout and Royalty Procedure with insertions as set forth in Schedule “B”;

“Farmout Lands” means the lands described as such in Schedule “A”;

“Mutual Interest Lands” means any parcel of land or other interest 50% or more of the surface area of which is located within the Area of Mutual Interest.

“Option Lands” means the lands described as such in Schedule “A”;

“Operating Procedure” means the 1990 CAPL Operating Procedure with insertions as set forth in Schedule “C”;

“Participant” means Pine as to an undivided 10% working interest;

To the extent necessary to effect the provisions of the Farmout & Royalty Procedure, references to "Farmor", "Farmee" and "Farmout Lands" within the Farmout & Royalty Procedure shall be deemed to be "Farmor", "Farmee" and "Farmout Lands", respectively, as such terms are defined in this Agreement

Unless otherwise provided herein, all other terms which are defined in the Farmout & Royalty Procedure shall, in this Agreement, have the meaning ascribed to them in the Farmout & Royalty Procedure

SCHEDULES

The following Schedules are attached hereto and made part of this Agreement:

Schedules “A” and “A1”, which describe the Farmout Lands, the Option Lands and the Encumbrances;

Schedule ”B”, which is the Farmout and Royalty Procedure;

Schedule “C”, which is the Operating Procedure;

Schedule "D", which specifies the types of drilling information required to be supplied by the Farmee to Farmor pursuant to the Farmout and Royalty Procedure.

TEST WELL

On or before November 30, 2006 (subject only to surface access, regulatory approval and rig availability – Farmee will use its best efforts to obtain these items in a timely fashion), Farmee (90%), on behalf of itself and the Participant (10%), will commence drilling a well at a location of its choice on the Farmout Lands (“Test Well”). The Test Well will de drilled to Contract Depth and abandoned or completed in accordance with the provisions of Article 3.00 of the Farmout and Royalty Procedure. As between Park Place, Patch and the Participant, the terms and conditions of the Operating Procedure shall apply.

Farmee shall not assign all, or any portion of, its interest in this Agreement without the Farmor's prior written consent.

INTEREST EARNED

By fulfilling the requirements enumerated in Clause 3 of this Agreement, and subject to the provisions of Clause 3.03 of the Farmout and Royalty Procedure, Farmee will earn an undivided 50% of Farmor’s Interest in the Farmout Lands. Thereafter, the Farmout Lands will be operated in accordance with the Operating Procedure with Patch being named as operator.

The Farmee shall pay its proportionate share of the Encumbrances on the Farmout Lands.

OPTION WELL

Within 45 days of release of the rig used to drill the Test Well, Farmee may elect to drill a well (“Option Well”) on the Option Lands to earn an interest in the Option Lands. All of the terms and conditions applicable to the Test Well will apply to the Option Well mutatis mutandis other than the Option Well will be commenced within 45 days of the Farmee’s election.

In the event that Farmee has acquired 3D Seismic data pursuant to Clause 6 of this Agreement, and notwithstanding the provisions of this Clause 5, Farmor may agree, at its sole discretion, that the Option Well be located in the Farmout Lands rather than the Option Lands.

3D SEISMIC

After the Farmee has drilled the Test Well, the Farmee may elect within 30 days of release of the rig used to drill the Test Well, to shoot a 3D seismic program over the Farmout Lands and the Option Lands (“3D Seismic”). Field acquisition of the 3D Seismic shall commence within 60 days of Farmee’s election and the 3D Seismic shall be acquired and processed at Farmee’s (90%) and Participant’s (10%) sole cost and in an amount sufficient to provide 100% coverage of an area of at least 1280 acres (the area of coverage shall include the Option Lands) within the Area of Mutual Interest. If the Farmee shoots the 3D Seismic, the time to elect to drill the Option Well will be extended until 45 days after completion of field acquisition of the 3D Seismic.

Farmor shall be provided with a licenced, processed copy of the 3D Seismic data.

Farmee may recover its share of the field acquisition and processing cost of the 3D Seismic (“Seismic Cost”) from the sale of petroleum substances from the Option Well (net of the lessor royalty, the Encumbrances and operating costs) as follows:

AREA OF MUTUAL INTEREST

Subject to Article 8.00 of the Farmout and Royalty Procedure:

The Area of Mutual Interest shall be in effect until March 31, 2008.

The interests of the parties in Mutual Interest Lands will be:

                  Farmee – 45%, Farmor – 45% and Participant – 10%

MISCELLANEOUS

Each of the Parties represents and warrants that it now has, or is entitled to have full right, full power and absolute authority to enter into this Agreement.

In the event of a conflict between any term or condition of this Agreement and any schedule attached hereto, the term or condition of this Agreement shall prevail.

Unless, and to the extent only, specifically provided for herein, no party shall be under any obligation to the other parties with respect to such party acquiring an interest in, or conducting operations on, lands other than the Farmout Lands and the Option Lands.

Any party which develops its own interpretation from information obtained pursuant to the Agreement shall not be required to provide any other party with such interpretation, or any interpretative data, or material, and shall be entitled to use such interpretations for its sole benefit.

This Agreement and the relationship between the parties shall be construed and enforced in accordance with the laws in effect in the Province of Alberta. Each party attorns to the jurisdiction of the Courts of the Province of Alberta, and all Courts of Appeal therefrom.

The terms of this Agreement express and constitute the entire agreement between the parties. No amendments shall be binding unless agreed to by all parties in writing. No implied covenant, or liability, is created, or shall arise, by reason of this Agreement, or anything herein contained.

This Agreement supersedes and replaces all prior agreements, documents, writings and verbal understandings between the parties relating to the Farmout Lands, the Option Lands and the Area of Mutual Interest.

This Agreement shall be binding upon and enure to the benefit of the parties and their respective successors and assigns.