MegaWest Progresses to 1,000 BOPD Production Capacity in Missouri

MegaWest Energy has provided the following operational update for its U.S. assets.


MegaWest has increased its Missouri lease holdings to now include a 100 percent interest in over 33,400 gross unproved acres of land. The Company has so far drilled 51 exploration/delineation wells with an 86% success rate and completed 120 development wells with a 100% success rate.

Phase I of the Marmaton River commercial steam drive project includes a steam generation and oil treating plant with a throughput capacity of 500 barrels of oil per day, 13 steam injection wells, 40 producing wells, one water source well and one water disposal well on approximately 10 acres. First oil sales from the project occurred in August 2008 and the project is producing approximately 50 barrels of oil per day as the steamflood ramps up towards its target of 500 barrels of oil per day. The drilling and tie-in of the 10 injection wells and 24 production wells on approximately 10 additional adjacent acres for the Marmaton River Phase II expansion is nearing completion. This will bring the developed producing acreage to a total of 20 acres on this project supporting the ramp towards target production while extending the target production timeframe. Steam injection into the Phase II wells is expected to commence in early November 2008.

The Company has completed construction on budget and on schedule of its second project, Grassy Creek Phase I, comprising 46 production wells, 15 injection wells, 2 observation wells and 2 service wells on approximately 19 acres. This project has a steam injection and production treating plant similar to Marmaton River with a design capacity of 500 barrels of oil per day. Commissioning is complete and steam pre-heat operations are scheduled to commence on October 15, 2008. Production is expected to ramp up over the next 6 to 9 months towards the target capacity of 500 barrels of oil per day.

It is anticipated that each of these projects will develop 250 to 300 acres of leases over its 25 to 30 year project life. Additional drilling phases on each of these projects will be necessary to maintain target production rates. It is further anticipated that a number of additional projects of similar design and size may be drilled and constructed across MegaWest's Missouri lease holdings.


MegaWest has drilled eight exploration wells at various strategic locations on its 36,000 acres of leases in Kentucky. This drilling program confirmed the commercial prospectivity of three Mississippian heavy oil pay zones found at depths of 200-600 feet from surface. A number of potential project locations have been identified, and the first location has been appraised with four delineation wells. A steam drive enhanced recovery project with a throughput capacity of 500 barrels of oil production per day has been designed for this location. Purchasing and manufacture of long lead items is nearly complete and permits have been submitted. The Company is awaiting final regulatory approvals on this commercial steam drive project before proceeding with further capital expenditures on site. This approval is expected in early 2009.

The New Albany Shale underlies a large portion of the Company's acreage position in Kentucky. 4,300 acres of the Company's leases have been farmed out for drilling and testing of New Albany Shale gas potential with the Company retaining a 34.75% working interest. Two wells have recently been drilled and logged and the operator is proceeding with plans to fracture and rate test these wells.


The Montana lease holdings include 42,650 gross unproved acres in Montana covering the Company's Teton, Loma and Devils Basin prospects.

Acquisition and processing of new 2-D seismic over the existing Teton and Loma prospects has recently been completed. Interpretation is now underway which may lead to the drilling of a number of wells to test these prospects. At Teton, MegaWest is targeting a heavy oil reservoir, which could ultimately be developed through the application of SAGD, steam drive or cyclic steam stimulation. At Loma, MegaWest is targeting a light oil reservoir.

The Devils Basin acreage includes demonstrated light oil production from the Heath Shale from vertical wells. Purchased trade seismic data has been reprocessed and will be used to identify prospective drill locations. MegaWest plans to test the prospect with a horizontal well.

The Company's Chairman and CEO, George Stapleton stated, "MegaWest has made continued progress in advancing each of our core project areas towards commercial production. We are especially pleased to have 1,000 barrels of oil per day of production capacity installed and now operating in Missouri. As production ramps towards target levels, we expect to begin to realize the value of these assets for our shareholders. The Company intends to focus currently available funds to increasing production from these projects in order to generate increasing levels of cash flow that will fund further development in each of our core areas."

MegaWest is continuing to execute its business plan to add shareholder value. MegaWest seeks to prove up significant resources and achieve early production from its heavy oil properties. MegaWest owns or has the right to earn an interest in over 146,000 acres in Missouri, Kansas, Kentucky, Montana and Texas. MegaWest's strategy for growth is underpinned by three converging market factors; the need for security of energy supply in North America, the current world oil price, and the new technical developments in commercial thermal recovery of heavy oil.

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