Kodiak Gets Extension on Leases to Test Muskwa Shale Gas Potential

Kodiak Energy, Inc. submitted an application to the B.C. Oil and Gas Commission ("OGC") for an extension to test the Muskwa shale gas potential on its leases. On August 12, 2008, Kodiak and partners received the formal extension approval from the OGC.

Kodiak and partners are immediately moving forward with the planned work program to be executed during the 2008/09 winter season. The well drilled in January 2008 will be stimulated using a staged vertical fracture and then flow tested to evaluate its post fracture deliverability.

The pipeline tie-in was previously scoped out. Based on a successful well stimulation, Kodiak believes the well can be tied in for production by the end of the 2008/09 winter work season. This test and development program could be one of the first Horn River Basin projects in this area to be put on commercial production and would begin to validate the overall reserves in the area.

Based on the success of this work program and the overall timing, Kodiak and partners will review the balance of the work program to determine what portions of the second phase can be advanced.

The second phase program consists of a horizontal leg off one of the previously drilled vertical wells. This is coupled with a staged fracture program and flow test to evaluate the post fracture deliverability with a tie in.
Kodiak's application to the OGC for extension to the license was based on the drilling results from the previous season and the lab analysis of the drill cuttings.

The Kodiak application proposed a Muskwa evaluation program using vertical and horizontal wellbores, which intends to prove up the lease as an extension of the Horn River Basin. This is similar to other test programs industry has used in other areas. No objections were received following a posting of the application notice on the OGC website. Upon final review of Kodiak's application, the OGC granted approval noting the shale gas potential requires ongoing research as to drilling, completion and production methodology.

Kodiak is the operator and 80% working interest owner of B.C. PNG (Petroleum Natural Gas) Lease 44104. This lease is situated on the South East edge of the Horn River Basin and the Muskwa shale gas prospect. The oil and gas industry continues to show dramatically increased interest in this shale gas play. Several comparisons have been made that the Muskwa shale gas potential is an analogue of the Barnett shale gas fields currently being developed in Texas.

The Lucy property may become one of Kodiak's major assets for production or disposition in the near term.


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