Statoil Completes Testing Operations at OzDelta-1 Well in Australia's NT

PetroFrontier Corp. (PetroFrontier) reported Friday that Statoil Australia Theta B.V. (Statoil), PetroFrontier’s joint venture partner and the operator of the 2014 work program and budget has completed testing operations at the OzDelta-1 well in Australia's Northern Territory. The OzDelta-1 well was perforated at 2,414 and 2,419 feet (736.5 and 737.5 meters) using an abrasion jetting tool within the Lower Arthur Creek Hot Shale formation. A small water based hydraulic stimulation was successfully completed and a total of 4,308 cubic feet (122 cubic meters) of water and 16.5 tons of sand were pumped into the well. Testing operations, utilizing a coiled tubing conveyed jet pump were then carried out. A total of 4,555 cubic feet (129 cubic meters) of water was produced with no measurable volume of hydrocarbons. The water recovered was of low salinity, suggesting it to be primarily completion fluid pumped into the well. No oil or gas was produced and the Operator is now in the process of abandoning the well.

These test results, along with those of the OzBeta-1 well suggest insufficient reservoir permeability to allow hydrocarbon flow. This is clearly disappointing considering the positive hydrocarbon indicators measured while drilling and subsequently derived from log data. This activity completes the drilling and testing plans for the 2014 Work Plan & Budget.

Statoil Amended Farm-In Agreement

Upon completion of the current Phase 2A of the Amended Farm-In Agreement (A-FIA), Statoil is to serve notice to PetroFrontier that the agreed work has been completed, and then has 120 days to elect to move forward with the next Phase 2B and commit to spending an additional amount of approximately $30 million or elect to relinquish the majority of its’ working interest back to PetroFrontier. Should Statoil elect to relinquish, they will remain as operator and hold a 30 percent working interest in EP 103 and EP 104, with PetroFrontier holding 70 percent. For EP 127 and EP 128, and not accounting for the dilution in Baraka working interest due to its election not to participate in the 2014 Work Program and Budget, Statoil will retain 22.5 percent (plus the diluted Baraka portion), PetroFrontier 52.5 percent and Baraka will retain 25 percent (less the diluted portion).

2014 Work Program & Budget

Statoil is the registered operator of the work permits and is obligated by the regulator and the farm-in agreement to satisfactorily abandoned and reclaim all wells and seismic lines. It is anticipated that the abandonment of the Baldwin and Macintyre wells will be completed prior to year end. Completion of surface reclamation work and final certification from the regulator will likely not occur until 2015.

2015 Work Program & Budget

Should Statoil elect to move to the next phase of the farm in agreement (Phase 2B), then a Work Program and Budget will be proposed and an Operating Committee meeting would be held to review and approve it. The timing of this is uncertain if it occurs at all.

Research & Development Tax Claim

PetroFrontier has recently filed for a Research & Development tax incentive with the Australian Taxation Office for a claim that could net PetroFrontier up to $3,355,732 (AUD 4,196,203). The outcome of this tax filing is uncertain and is expected to be resolved prior to year end.

Separately, PetroFrontier Corp. revealed that Macquarie Capital Markets Canada Ltd. (Macquarie) has filed a Statement of Defence and Counterclaim against PetroFrontier in response to the previously announced Statement of Claim filed by PetroFrontier in the Court of Queen’s Bench of Alberta. PetroFrontier will vigorously proceed with its lawsuit against Macquarie and its defence of the Counterclaim.


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