Lucas Energy Inc. (NYSE: LEI) has executed a term sheet for a participation agreement with Milestone Energy LLC for the development of oil and gas properties located in the Gonzales, Wilson, and Karnes counties, Texas, of the Eagle Ford/Austin Chalk trend.

The binding provisions of the term sheet call for Milestone to contribute 80% of the cost or value of the acreage to be developed and the company to contribute 20%, and Milestone will be responsible for 100% of the drilling and completion cost, as well as project generation fees. The company anticipates Milestone contributing from between $40 million and $100 million to the joint venture pursuant to the terms of a final participation agreement.

Lucas will be the operator of the properties, contributing its expertise and knowledge of the area as well as making available to the joint venture certain acreage it has acquired in the past. Milestone will earn an 80% working interest in those properties in which Lucas has an undivided interest, and 80% of the company's working interest where it has a divided interest in such properties. Lucas will retain 20% of its current working interest in such properties, with all such working interests being subject to the terms of the final participation agreement.

The formal participation agreement is expected to be finalized, and drilling is anticipated to begin, in late October 2012.