Norwood Identifies Oil in 7 Zones at San Bartolo

Norwood Resources has completed the drill stem testing ("DST") of its San Bartolo well with oil recovered from several zones. The well is being suspended and classified as a potential oil well.

DST's were run on eleven intervals (587 net feet). Three were tight, one produced salt water and oil was recovered from seven intervals. Of the seven that recovered oil, one is considered to be non-productive. The six remaining intervals have estimated production ranging from 10 to 100 barrels per day. Total combined production is estimated at 205 barrels per day. The specific gravity of the oil recovered is in the 34-43 API range. Although production rates from the oil-bearing sands are less than hoped for, results from the water zone indicate reservoir quality rock capable of producing 900 barrels per day. DST test results indicate that the productive oil intervals will require artificial lift facilities due to low permeabilities (2-50 mD) and low pressures in some of the zones. At least three of the intervals require some remediation to reduce associated water production. Finding better oil bearing reservoirs and enhancing production rates from existing oil-bearing sands is now a key challenge for the Company.

The Company has temporarily plugged San Bartolo, released all service companies and is pursuing more appropriate and cost effective drilling and production related equipment before continuing evaluations.

The next step will be to evaluate the sustainable production potential of these oil-bearing formations. We plan to bring in appropriate artificial lift equipment, oil/water separators and associated equipment and put this well on a long-term production test. A smaller rig with specific services should result in substantially reduced well costs. This retooling effort is expected to be completed by the end of the rainy season in November of this year. At that time the Company plans to commence longer-term production tests on the San Bartolo well and will possibly re-enter Las Mesas for production tests there as well. We will also consider additional delineation drilling in the close vicinity to the San Bartolo well to obtain critical reservoir core data, additional geologic, reservoir engineering and production information.

In the meantime, the Company will continue to integrate drilling and well log information with its seismic data, evaluate reservoir rock properties, pressure data and DST results for new well location identification. Although more costly than anticipated, Norwood's first two exploration wells have proven up most of the critical play elements necessary for commercial oil development. We have proven the oil bearing hydrocarbon system is working in this basin with high quality light oil being generated and trapped in a number of reservoir sands. The trap sizes are large but more complex than was evident on our regional spaced seismic program. Although significant amounts of reservoir sands are present, some are fairly tight and will require special attention in order to obtain commercial production from them. Given the relatively close access to the Nicaraguan refinery, the light gravity of the crude tested and the potentially large oil in place, we remain optimistic that we will be able to convert these exploration lands into commercially producing fields.


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