The farm-out with Ampac Petroleum will target both the shallow Mattson sands and deeper Nahanni formation at the Field. The first phase of the farm-out will involve the re-entry and re-completion of four existing wells for the Mattson sands. The farm-out agreement also includes two optional wells - one for a previously unidentified Mattson sand and the second to target a new compartment in the deeper Nahanni formation.
Ampac will fund and operate the initial phase to earn a 50% interest in four re-entry wells. By drilling the first option well, Ampac will earn 50% of the remaining rights in the Mattson. Ampac will earn a 50% interest in the Nahanni by drilling the second option well. Questerre will hold the remaining 50% interest in the Field.
The Company expects that the initial phase will commence as soon as this summer subject to receipt of regulatory approval and no later than March 31, 2006. To this end, Ampac as operator under this agreement has placed a $1 million security deposit in trust. Ampac Petroleum Inc. is a private company engaged in oil and gas exploration and development in Western Canada. Jed Wood, a Director of the Company, is the sole shareholder and director of Ampac Petroleum Inc.
The Mattson sands at the Field were tested by Amoco in the 1970s but never produced due to poor drilling and completion techniques. The test rates ranged from 500 mcf/d to 12 mmcf/d. Utilizing underbalanced drilling and completion technology, the Company and Ampac are confident these test rates could improve substantially.
The Mattson sand potential of the Field was recently identified based on the reprocessing and re-interpretation of the 3-D seismic survey over the Field. By correlating these gas tests and shows while drilling with porosity anomalies on the seismic, Questerre has mapped several sands in the Mattson horizon. Questerre's independent reservoir engineers have assigned probable reserves of 4.8 Bcf to two of these sands.
Michael Binnion, President and Chief Executive Officer commented, "We are very excited about this joint venture with Ampac. Based on the total cost of these re-entries and option wells, this farm-out agreement represents a potential $25 million investment in the Field. With success, this farm-out could dramatically improve upon our target exit rate of 500 boe per day for 2005."
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