On the Company's eastern land block, 2 to 5 wells will be targeting Moulton/Glaconite channel sands at depths of approximately 4000 feet. During the summer of 2004, the Company reprocessed approximately 40 miles and interpreted approximately 200 miles of 2D seismic to identify 5 initial prospect areas for Moulton/Glaconite channel sands extending 6 townships across the Company's land holdings. Based on data published from the Montana Geological Society, the Cut Bank Moulton pool, an analogous field to these targets immediately east of the Blackfeet Reservation, has produced approximately 14 million barrels of oil and 31 billion cubic feet of gas with an estimated average initial production rate of 500 boe/d per well.
On the Company's western land block, 3 to 4 wells are planned for locations on the northern portion of K2's lands where technical data indicates increasing reservoir pressures in the upper Cretaceous sandstones towards the Canadian border. These well locations will be targeting un-drilled regional and/or thrusted Virgelle and Two Medicine sandstones.
Separately, the Company has been advised by its joint venture partner, Zargon Oil (ND) Inc., of their intent to surrender their option to drill 3 wells on or before April 18, 2005 within the Triangle Zone prospect area. As a result of drilling the initial 2 commitment wells, Zargon earns a 50% interest in 21 sections (13,440 acres) within the prospect.
K2 is continuing discussions with prospective industry partners for the formation of joint ventures on both the above referenced exploration program and other prospect areas such as shallow Bow Island natural gas and thrusted deep Mississippian gas targets to which seismic reprocessing has recently been conducted. These prospects are contained within K2's large land position on the Blackfeet Indian Reservation in northern Montana. The Company aims to commence this exploration program in early 2005, subject to receipt of regulatory approvals and obtaining funding for the program, and is currently assessing rig availability.
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