Derek's geological/geophysical consultants selected the well placements based on interpretations and targets identified in the US$1.1 million 3D seismic completed over 4.5 square miles of the property. Within the program area, the pay zone is estimated to be 40 to 70 feet thick. Budgeted costs of the program are estimated to be US two million five hundred thousand dollars (US$2.5 Million). The current pilot phase production is approximately 45-60 barrels of oil per day (bopd), from one horizontal well, and the Company expects that within a year of commencement of steaming into the 13 well program area we will produce approximately 550 bopd.
This program will be conducted jointly with SEC Oil and Gas Partnership ("SEC") on a fifty-fifty cost basis, with SEC receiving fifty percent of the revenue until payback of their initial investment. Once payback is met SEC's revenue interest will revert to forty percent. As part of the participation agreement SEC will receive 1,000,000 Derek share purchase warrants, exercisable at $0.75 for nine months after completion of the 13 well program, and exercisable at $1.00 for the next 12 months.
To oversee this program the Company has retained the combined consulting services of Pacific Geotechnical Associates Inc. (Bakersfield, CA), SI International Inc. (Denver, CO Office) and Peterson Energy Management, Inc. (Loveland, CO). These consulting firms will combine to deliver extensive expertise in all aspects of heavy oil project management, development and production to Derek's LAK Ranch Project.
Further to Derek's news release of October 25, 2006, Derek anticipates closing the purchase of Ivanhoe Energy's interest in the LAK Ranch Project on December 1, 2006.
Derek Oil & Gas Corporation is a Canadian based, publicly traded oil exploration, development and production company that utilizes enhanced oil recovery (EOR) techniques to develop new production from reservoirs in North America. Derek's current focus is on the further development and increasing production from their prime property located in NE Wyoming's Powder River Basin.
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