Petro One plans to commence its Canada summer development drill program July 29, 2011 with a focus on ramping up production by summer's end. This program is planned to start with 6 wells stepping out from the discovery well on Parcel J5 to grow reserves and build production. Once those 6 wells are completed, Petro One will still have 11 strong targets remaining to be drilled on half of J5 lands where seismic has been shot to date. Additional seismic is planned to cover the rest of the J5 property to generate further drill targets and exploit the full potential of this acreage. All successful wells from this program are planned to be completed and brought into production by the end of summer.
All 17 targets remaining to be drilled are based on high-resolution seismic shot by the Company in Spring, 2011 and coincide with structural lows at the Viking level, indicating that all of the drill targets are in the oil zone. In addition, the isochron indicates that the Viking reservoir at several of the six currently licensed locations is at least the same thickness as in the discovery well, which intersected 30 feet (10 meters) of pay. The Viking amplitude at all six locations is as good or better than the amplitude at the discovery well, which contained core permeability measurements up to 3980 mD, and several targets show distinctly lower amplitudes that are interpreted to indicate zones of higher porosity than seen at the discovery well. As a result, all six new locations are believed to have as much potential or stronger potential than the discovery well.
The discovery well is now flowing and in full production on its own pressure, with excellent 48-hour production of 50 to 60 barrels of oil per day without the need for stimulation or pump. Core and logs have shown that the entire 10-meter thick Viking pay zone in the discovery hole is porous and oil bearing, and Petro One has commissioned a new NI 51-101 report to upgrade its proved and probable reserves that will be reported in the immediate future. A fluid sample analyzed by Core Laboratories in Calgary consisted of water-free oil with an API gravity of 30.6 at 15.6 degrees C, which is light oil as classified and confirmed by the Saskatchewan Government. Flow pressure remains stable in the tubing at 1,000 kPa, indicating a reservoir of excellent quality, and downhole pressures confirm that it is part of an extensive regional hydrocarbon system.
"The pressure at our discovery well demonstrates communication with a major oil reservoir system, which is very positive for Petro One," said independent consultant Charles W. Chapman, P. Eng., President of Chapman Petroleum Engineering Ltd.
Nearby Dodsland Oil Processors will process and market oil from the Milton J5 property. The 48-hour IP test confirmed a very low water cut, visually estimated at only 0.7%. As a result of the low water cut and close proximity to a major pipeline, total processing costs for the Milton oil are minimal at approximately $3.36/bbl, making for excellent economics at current oil prices.
With gas production nearby and a gas pipeline crossing the property, Altagas has confirmed there is a tie-in point on Petro One's land and plenty of spare capacity in the line. This provides excellent economics for potential future gas development where the formation is indicated by seismic to be favorable for gas production on our lands.
In addition, Petro One has obtained drilling licenses for three locations on its J1 property, and plans to commence drilling next week. Both 3D seismic and well control have confirmed several strong drill targets that are structurally higher than a nearby prolific conventional oil well producing from the Mississippian Frobisher-Alida limestone at a shallow depth of only 1,100 meters. This unit forms one of Saskatchewan's best reservoirs, characterized by long-lived producers with excellent flow rates from both horizontal and vertical wells. The initial target is located only 200 meters updip from an excellent existing vertical producer that has produced over 183,000 bbl to date, and 100 meters downdip from another well with cumulative production of nearly 60,000 bbl since 2000. Petro One has already been credited with a NI 51-101 unrisked best estimate prospective resource of 500,000 bbl on this property (Petro One News Release October 14, 2010), and the Company is optimistic that the first well has strong potential to both increase and upgrade this resource to reserve status. All successful wells from this program are planned to be completed and brought onto production by summer's end.
"We are very pleased with the excellent production rates achieved by our initial J5 well," said Petro One's President Peter Bryant. "Thanks to the outstanding reservoir characteristics at this location, this production has been achieved with a conventional vertical well and no need for a pumpjack, making for very favorable economics. Production from the J5 oil field transforms the Company into a new emerging producer, and serves as a solid foundation on which to build. We are aggressively moving ahead with development of the pool with a strong focus on growing production and look forward to reporting the results as drilling proceeds.
We are also very optimistic about the potential for sustainable, strong production as seen in the Frobisher-Alida reservoir adjacent to our J1 property, where we are set to drill our first well in the immediate future. We have eleven additional 100%-controlled properties across the Williston Basin that are diversified to multiple plays and reservoir types, including some prospects with multi-zone potential. Once both the summer drill programs have been completed and we have upgraded our production and reserves and have a better understanding of the full value of our holdings in Goldstrike Resources, we plan to lay out an extensive development and drilling program forward through to December 2012. The company continues to move ahead on a variety of fronts to develop new production, expand its landholdings, and assess opportunities that will best lever its assets to optimize rapid growth and build shareholder wealth. I look forward to reporting future developments with great optimism."
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