NAL Oil & Gas Trust has provided an update on recent corporate activities.
BUILDING ON CARDIUM OIL MOMENTUM IN CENTRAL ALBERTA
Building on recent success in NAL's emerging Cardium oil resource play in central Alberta, NAL is pleased to announce that it has entered into a joint venture agreement with a senior industry partner. The arrangement consists of a three year commitment to spend $50 million (Trust - 65%, Manulife Financial Corp. - 35%) that provides NAL an opportunity to earn in over 150 sections of freehold and crown acreage. The agreement is exclusive to NAL and structured to be extended for up to an additional six years for a potential total commitment of $150 million. This transaction doubles NAL's Cardium acreage position adding land south of NAL's Garrington area.
The Cardium formation will be the primary target, utilizing horizontal drilling and fracture stimulation technology to maximize resource recovery potential. The Viking and Mannville formations also offer multi-zone potential for liquids rich natural gas and light gravity sweet crude oil, adding good option value to this opportunity.
In addition to this partnership agreement, NAL was successful in the March 4, 2009 Alberta Crown land sale, acquiring acreage of approximately ten sections. This land is adjacent to the Trust's most recent successful drilling locations in Sylvan Lake and adds further horizontal drilling prospects to NAL's inventory.
In aggregate, these transactions have increased NAL's horizontal Cardium oil prospect inventory by approximately 50%, to more than 200 potential locations. It is expected that the inventory of drilling prospects will continue to grow as the resource continues to be delineated.
CARDIUM PLAY OVERVIEW
NAL drilled and completed three horizontal wells in the Cardium trend at Garrington in the fourth quarter 2008. These wells are now on stream with three month production profiles that are above economic thresholds using forward strip pricing without considering royalty incentives. These early positive results have validated a follow-on program of 12 horizontal wells with two locations being drilled in the first quarter of 2009. Initial completion results are in line with previous wells and it is expected that this new production will be on stream in early April. The Trust will drill two or three locations related to this new opportunity during 2009.
NAL's current horizontal drilling in the Cardium trend is characterized by:
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