Solimar Hits Paydirt at Southeast Lost Hills Gas Project

Southeast Lost Hills Gas Project
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Solimar announced that a new gas productive sandstone reservoir has been discovered in the Jack Hamar 2-13 well at the Company's 100% owned and operated Southeast Lost Hills gas project (SELH). The new zone was tested after a recent re evaluation of prior well results high graded the interval at approximately 2,050 feet as likely to contain gas.

During two days of testing the well flowed at up to 400mcfd with production stabilising at approximately 250mcfd. The flow rates are consistent with offset field analogues and within Solimar's range of expectations for relatively thin reservoirs of the type. It will take less than a week to tie the well into Solimar's existing gas plant, which is in turn connected via pipeline to a gas export trunkline. A long term production test will then be conducted to determine the extent of the gas reservoir. All gas will be sold under a sales agreement that Solimar has with the owner of the trunkline, one of California's largest oil and gas production companies.

Although it will take further productive history to estimate the volume of gas contained in and long term productive potential of the new gas reservoir, the operation is immediately commercial. The cost of the operation inclusive of tie in to the production facility is estimated to be less than US $50,000 and based on current gas prices the Company expects to achieve over US $4.20 per mcf of sales gas.

The gas discovery at the 2-13 well is in a shallower reservoir than the gas discovery at the Jack Hamar 3-13 well that was brought on stream by Solimar at 300mcfd in 2008 but is currently shut in due to mechanical issues and pending workover. The forthcoming Almond Grove 4-13 well that Solimar expects to commence drilling next month will be located 1.4 km from the new discovery zone. It has as the primary target a sand equivalent to the producer in the 3-13 well but in a structurally higher position within a separate compartment of the mapped trap.

The successful test of the gas zone in the 2-13 well is an important milestone for the SELH project as it strongly indicates that other zones with high gas indications when drilled by older wells in the area (generally targeting and designed for deeper objectives) are also likely to be saturated with gas. Further the Company believes it can now match these gas reservoirs to anomalous zones of high amplitude on the existing 2D seismic data. Such seismic amplitude anomalies are commonly indicative of gas in hydrocarbon bearing basins around the world particularly involving relatively young (in this case Pliocene age) and shallow sandstone reservoirs.

The results so far improve the probability that the soon to be drilled Almond Grove 4-13 well, which has been sited based on a similar seismic anomaly, will be successful. The new well will be the first to be drilled by Solimar as Operator using modern well drilling and completion techniques specifically designed to test the shallow (less than 3,500 feet) Pliocene sands.

Solimar is targeting a recoverable gas resource of 40 Bcf in SELH but depending on how many reservoir sands are encountered in future wells and the structural configuration of the trap this estimate could be significantly higher.

Commenting on the test result John Begg, newly appointed to drive the growth of Solimar as an oil and gas production company, said: "This is a very pleasing result as we weren't sure mechanically if a test in the 2-13 well would succeed due to a less than optimum drilling history. We will consider re-entering other older wells in the area in which we have identified zones of interest that now have genuine potential to increase our gas production and cash flow at minimal expenditure. Most importantly however the results show that we should be able to predict the distribution of the gas sands within our large controlled acreage position. This provides us with further evidence to support our overall targets for the project."

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