Calvalley Makes Major Oil Discovery in Yemen

Calvalley Petroleum Inc. has made another discovery on Block 9 in the Republic of Yemen.

Further to the June 27th press release, that identified a successful Saar oil discovery with its first well at the Hiswah structure, Calvalley is pleased to announce a second discovery of hydrocarbons in the "Auqban-1" exploration well (previously referred to as the Q-5 prospect).

Calvalley commenced drilling of its second exploration well on July 1, 2002 and completed drilling on July 18, 2002, reaching a total depth of 1,748 meters. Open hole logging was carried out over the total depth of the well. The logs revealed oil bearing vuggy, limestone at a depth of between 1677 to 1699 meters. The well was cased and completed with seven inch production casing.

Four zones, approximately 10 metres in total, were perforated and tested. The results of the initial drill stem test are very encouraging. Oil flowed at a rate of 750 barrels per day through a half inch choke. The crude tested at 35.9 degrees API, contained less than 0.5% sulphur and had zero water content. The bottom hole pressure during the test was in the range of between 3,100 psi to 3,800 psi.

A meeting was held with the Petroleum Exploration Production Authority of the Republic of Yemen to review the unique nature of this recent discovery by Calvalley. Several aspects of the discovery are quite important. First, the oil is significantly lighter and sweeter than that produced by Nexen and TotalFinaElf in their nearby production blocks. Second, the initial geological evaluation suggests that this discovery may be a significant "reef structure", the first such discovery in Yemen. Third, this potential reservoir is believed to belong to the Shuqra formation of the Jurassic age, which is the first of its nature in Yemen. Calvalley and its partners, Hoodoil and Reliance Industries, will conduct further geological and geophysical studies in order to confirm these initial conclusions.

Calvalley, is the Operator and 60 percent interest holder in Block 9. The company and its partners are very pleased with the results of this second well. The presence of commercially producible hydrocarbons has now been discovered in three different geological structures on Block 9, i.e. oil in the Saar (1996 Hiswah discovery and 2002 Q-6 discovery); condensate and gas (1994 Qarn Qaymah Kohlan sandstone discovery) and now the 2002 Auqban-1 potential reef discovery. The company believes that the history of discoveries on Block 9 provides significant additional exploration and development opportunities on the Block.

Calvalley intends to drill two more exploratory wells on other potential and promising structural features identified on the Block, commencing early in the fourth quarter. This will allow the company sufficient time in which to fully assess the production test results, as well as, the logs from the first two discoveries and to integrate this information with the existing seismic data. The company anticipates being able to test its first discovery (Q-6) within the next two weeks, as soon as the drilling rig has relocated to the site, approximately 15 km away from the Auqban-1 well.


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