Kodiak, Partners Set Budget for Lucy Horn River Project

Kodiak Energy, Inc., operating in British Columbia as Kodiak Bear Energy, Inc., announced that a partner meeting was recently held at Kodiak's office and the budget was approved for the first completion operations of the Corporation's "Lucy" Horn River Basin shale gas program.

The approved budget will enable Kodiak to stimulate the Muskwa/Evie shales in the a-79-A/94-P-4 vertical wellbore, which was cased in Q1 2008. The completion equipment is being sourced with plans to complete the vertical shale gas well in Q4 2008. The shale gas stimulation is based on previous regional industry practices and will be a slick water fracture. Production and reservoir testing, which will include a multi-point flow and build up test, will be completed immediately after the stimulation.

In early October 2008, a Kodiak construction supervisor scouted the Lucy project area to evaluate the current access and lease conditions and confirmed the construction operations will begin in November 2008 once the ground is frozen.

The pipeline tie-in for this wellbore 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 vertical completion 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 of the work program consists of drilling an approximate 800 to 1,000 meter (2,424 to 3,280 feet) horizontal leg in the Evie formation, starting from one of the previously drilled vertical wells on the mineral lease. The horizontal wellbore completion will include a large staged shale gas fracture stimulation program and a flow and buildup test to evaluate the post fracture deliverability. The pipeline tie-in for the horizontal well was previously scoped out.

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 Government of British Columbia recently released land sales proceeds for 2008 to be in excess of C$2 Billion, which is a record high for the province, with the majority of the sale results coming from shale gas prospects. The September B.C. crown land sale had several parcels of mineral rights in the Horn River Basin leased for prices in excess of C$12,000 per hectare.

The Lucy property has the potential to yield short term cash flow or become one of Kodiak's major capital divestiture opportunities. If divested, the proceeds will assist in the funding of other developments.
 

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