Cano Petroleum to Expand Enhanced Oil Recovery on Nowata Fld

Following positive test results, Cano Petroleum plans to expand its enhanced oil recovery efforts in its Nowata Field, located in northwest Oklahoma, and continue its growth and acquisition strategy through recently acquired additional funds.

At the Nowata Field, Cano is preparing to implement Alkaline-Surfactant- Polymer (ASP) technology, an advanced combination of inexpensive chemical additives that have proven effective after recovering as much as 30% of the original oil in place (OOIP) following the initial waterflood. A portion of the new funding will also support the complementary application of a surfactant-only method to recover bypassed oil remaining in the producing Bartlesville Sandstone formation in the field.

Cano partnered with Surtek of Golden, Colo., in December 2004 to determine whether ASP could be utilized as the lead technology at the Nowata Field to enhance oil recovery efforts and maximize oil recovery. After initial testing, Surtek has identified promising ASP chemistry. A series of independent lab results by a surfactant supplier have exceeded expectations, increasing recovery from 19% to 28%.

Based on Surtek's in-depth reservoir analysis, Cano will commence an expanded pilot to determine future application there.

"These initial test results affirm and bolster Cano's strategy to apply enhanced oil recovery methods to mature oil fields," said Jeff Johnson, chairman and chief executive officer of Cano. "The surfactant supplier's lab results confirm our expectation of the surfactant technology's capabilities, and we look forward to combining it with the ASP application to increase the amount of oil recovered and rate at which it is produced."

Current production at the Nowata Field is approximately 250 bopd. Cano's third-party engineers, using SEC price decks, have concluded that there are an estimated one million barrels of proved producing oil reserves from 228 producing wells at 600-foot depth. The 2,600-acre field has approximately 58 million barrels of OOIP which could yield up to 16 mmbu of oil using ASP technology.

Cano anticipates as much as 4,000 bopd within 18 to 24 months after full field implementation operations begin, most likely in 2006. No new exploratory drilling will be necessary in the pilot phase, though Cano plans to drill a well to obtain a new core sample for further Surtek lab analysis.

Cano acquired the Nowata Field on Sept. 14, 2004.

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