Montello is farming into the PN&G rights held by Pennine Petroleum Corporation ("Pennine") in the Pincher Creek area of Southern Alberta. Montello shall also have the right of Option, to be exercised within 45 days of notification, to participate as to a minimum of 25% of Pennine's interest in the drilling, completion, or abandonment of any proposed well on the lands held by Pennine within the area of Township 3 and 4 Range 28 to 29 W4M. These lands are approx. 175 kilometers south of the City of Calgary, and consist of both Crown leases and Freehold leases representing 10,560 gross acres (approx. 4,851.2 net acres to Pennine). There are several projects in the Pincher Creek area for example the upcoming "Upper Zones Play" mentioned below, which both companies feel represents an opportunity to undertake immediate operations to obtain production and prove up additional target wells for revenue enhancement.
Montello is farming in for twenty five percent (25%) of the re-completion and testing of the Brown Sand and Mannville formation of the well bore "Pennine et al Pinh Ck 1-11-4-29W4M". Pennine is the Operator and has a Working Interest (WI) of 37.5%, and plans to re-complete the 1-11 well on or before August 31st in the Mannville Sands with Montello, Paramount Resources, and a Private Company as the other Joint Venture Partner. This prospect has similar characteristics to a well of 125 barrels of oil per day and three million cubic feet of gas (500 barrels of oil equivalent per day) re-completed in 2006 in the Lookout Butte field, approximately 15 kilometers to the south of this location. The Pincher Creek prospect has tie-ins to local facilities and has shown a total possible raw gas reserve of 16.92 billion cubic feet (3.81 million cubic feet to the company), based on a December, 2006 Report of an Independent, Calgary Engineering Firm. It is believed that each of two zones being tested is of similar reservoir quality.
Next up, Montello shall have the option to be exercised within 45 days of notification, to participate as to a minimum 25% of Pennine's interest in the drilling, completion or abandonment of the proposed deep Rundle Test Well to be drilled at the location of 6-12-4-29W4M4. Pennine again will be the Operator of the Rundle prospect in the Pincher Creek Area and intends to drill at least one well into the Rundle formation on or by December 31st, 2007. There is Rundle production within two miles of the prospective location. The Rundle zone is expected to be encountered at a depth of 3,880 meters. An independent third party Calgary engineering firm has estimated the prospective resources range from 18,000 BCF (raw gas reserves) low estimate to 24,000 BCF, best estimates up to 30,000 BCF - high estimate. It is believed given full 3D Seismic, that there is an untested imbricate thrust fault that lies out in front of the northern part of the main producing Rundle Formation imbricate. Since this project is in an active gas producing area, the predominant risk is the possibility of the well not encountering a reservoir of sufficient quality to yield the expected rates and drainage area as predicted, or that the target sheet is not isolated from the producing reservoir. A probability of 36 % has been estimated for the best estimate case.
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