At press time, Derek expected the fifth well to be drilled by late Thursday. The drill will subsequently be moved to the "north" pad, where directional drilling will commence.
Randy Metz, Derek's primary geological consultant, reported: "The wells are coming in as expected. Given the dips in the area the sands have come in at expected depths, and the thicknesses are in line with what we have computed from the seismic isochrons. The numbers derived from the logs have indicated good oil saturation levels."
Derek management said that costs for and operation progress on the 12-well program is on track, and tie-in to facilities and steaming is due to commence in May 2007.
The 12-vertical-well program, totaling approximately 13,250 feet, will consist of a pattern of four injector and eight producer wells targeted to produce from the Newcastle sandstone formation. Derek's consultants selected the well placements based on targets identified using the US$1.1-million, high-definition 3D seismic survey completed over 2880 acres (4 1/2 square miles) of the 8000-plus-acre LAK Ranch property. Within the program area, the pay zone is estimated to be 40 to 70 feet thick. The estimated drill budget is US$2.1 million.
This 12-well program is being conducted jointly with a third party on a 50-50 cost basis, with the third party receiving 50 percent of the revenue until payback on their initial investment is met. Once payback is met, the third party's revenue interest (only on the 12-well program production) will revert to 40 percent. Derek will have a 95% working interest in any current and future development and production on the property outside this 12-well program area.
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 prolific Powder River Basin.
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