ViaLogy's Exploration Technology Leads to Large Oil Find in Texas

ViaLogy's QuantumRD(TM) oil exploration technology and service has been credited with locating a major new oil deposit on the Galba Prospect in South Central Texas. The success marks the operational and commercial validation of the company's software-based seismic interpretation service for oil and gas reservoir discovery and characterization. The technology accurately predicted the size, location and porosity of three reservoirs.

The successful drilling effort and oil strike based on the ViaLogy analysis located reservoirs at increasing depths estimated to contain a total of over 2 million barrels of recoverable reserves. The company's contract with Atascosa Exploration LLC, of San Antonio, Texas, for the Galba Prospect foresees multiple wells on the lease, now determined to be 4 or 5, targeted at the three reservoirs and positioned by ViaLogy. The first well, just completed, has located a reservoir with an estimated oil deposit which will produce 153,000 barrels of crude oil (i.e. 35% primary recovery based on an overall actual volume of 460,000 barrels). Atascosa plans extractions of 50% of the recoverable reserves in first three years. Under its contract with Atascosa, ViaLogy will receive a 5% Back-In-After-Payout (BIAPO) working interest.

This means that after costs ViaLogy will receive over $300K over the life of this first well (assuming oil price at $40 per barrel). Galba Prospect production will begin immediately. For the entire field, ViaLogy could receive 5% of the 2 million barrels over the lifetime of the field's wells which, assuming an average $40 oil price, would produce around $4 million.

ViaLogy's role in the Galba Prospect project included the design and acquisition of new, high-resolution 3D seismic survey data, integrated geoseismic and geological assessment, and positioning of the drill site. ViaLogy collaborated closely with Atascosa's geology and production team. Oil was found at the depth and with the porosity ViaLogy predicted in the Upper Wilcox formation, and all other parameters conformed to the company's analysis and its determination of coordinates for the drilling site.

ViaLogy believes that its geoseismic interpretation technology will address a problem faced by the oil industry worldwide -- to avoid drilling dry holes. In Texas, only four out of 10 exploratory wells, including those drilled with the aid of seismic, find oil or gas in economically producible quantities. Abortive attempts are costly. According to US Dept. of Energy (DOE) Energy Information Administration (EIA) statistics, the 2006 average cost for drilling an on-shore dry hole in the US was over $450,000. The success of the Galba Project reinforces QuantumRD's value proposition for locating oil reservoirs while lowering the probability of dry holes, and thus reducing the overall cost of exploration.

Working with Atascosa, ViaLogy plans to market the QuantumRD technology and service initially to US independent exploration companies. QuantumRD is a computational technology based on ViaLogy's patented Quantum Resonance Interferometry (QRI(TM)), an active signal processing technique capable of significantly increasing the signal to noise ratio of seismic data and improving its value.

Commenting on the Galba Prospect find, Atascosa's Chief Executive, John Mullins, said, "We're very pleased with the success of this well. We have increased our lease positions at the prospect, and are planning to further grow our collaboration with ViaLogy on Galba and other prospects. Our geology team has been working with the ViaLogy scientists for some months now, and we're highly impressed with the technology behind QuantumRD. The accuracy of the results is remarkable and the payoff is reducing the risk of dry holes."

He added, "The quality of the information relating to the size and content of the reservoirs enables us to position the wells to extract the maximum amount of hydrocarbons."

ViaLogy's CEO, Robert W. Dean, commented, "Our success in Texas validates QuantumRD, and is a key step in building a services business in the oil and gas industry. We have a potentially global product, but initially we intend to focus our sales efforts for our oil detection technology and services on US-based independent exploration companies. Going forward, we expect it will be attractive to established seismic data companies, oil field services companies, and the oil majors."


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