Rally Energy Moving Ahead with Ras Issaran Drilling Program

Rally Energy reports that oil sales in December and January averaged in excess of 1,615 bbls/d from the Ras Issaran field in Egypt. In both December and January sales were restricted due to problems at the North Amer terminal that have now been corrected. Sales through the first 15 days of February are in excess of 1,900 bbls/d. Well #25 continues to produce at a rate in excess of 900 bbls/d.

Rally Energy commenced a four well drilling program prior to year-end and has drilled and cased three wells. The first well, #30, was drilled as an offset to well #25 in the Northern portion of the field. The well is structurally separated from well #25 but contains a large section of potential Upper Dolomite oil pay, approximately 110 feet on logs and is expected to be tested shortly. It is expected that a fourth well, #42, will spud prior to the end of February. This well is on trend with well #25, and is targeting the Lower Dolomite section which produces the high volumes of oil in well #25.

Two wells, #40 and #41, were drilled on the Southern portion of the field and were targeted to test the Zeit sands, the Upper and Lower Dolomites and the Nukhul formations. Both wells show significant pay thickness in all zones. Of primary significance is upwards of 225 feet of Lower Dolomite potential pay in both wells. In well #40, difficulties were encountered in cementing of the well casing and are currently being addressed. Well #41 is currently being completed and will be tested to determine productive capability. In anticipation of successful testing, Rally Energy has identified another five locations offsetting wells #40 and #41 and will be presenting these locations to the General Petroleum Company for approval.

Steam Stimulation Program

Rally Energy has completed the Steam Simulation Study and has presented a three well Pilot Program to the Egyptian General Petroleum Corporation. This pilot is expected to commence in April and is designed to test potential secondary production from the Upper Dolomite formation. Upon a successful pilot, Rally Energy will move to a larger pre-production pilot and ultimately to a full production model. It was independently estimated that the first area of Upper Dolomite to be tested through this process has 71 Million barrels of Original Oil in Place, and based on current reservoir modeling, management believe that the potential of 20%+ recovery through a successful steam project is possible.
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