GeoPetro has provided detailed information on its California project in Kern County, California.
The Lokern Project
The Company owns a 100% working interest in 1,280 acres in the Lokern Project, located in the southern San Joaquin basin, near Bakersfield, California. The primary exploration objectives are the Miocene Stevens formation and the deeper Carneros member of the Temblor formation. The secondary objectives include the Miocene Reef Ridge and Pliocene Etchegoin sands.
The prospect lies on a large seismically-controlled structure which is possibly the last remaining undeveloped large structure in the southern San Joaquin Basin. It is postulated that an accumulation occurs where an Upper Stevens turbidite channel sand lies draped across the well defined Lokern structure, forming a structural-stratigraphic trap. Similar conditions may be present in the deeper Carneros member of the Temblor formation. Some of the largest oil and gas reserves in the U.S. are located in this part of the San Joaquin Basin which has total accumulations greater than 10 billion barrels of oil and 10 trillion cubic feet of gas.
The prospect was originally developed in part as a result of positive results from the Machii-Ross Ackerman show well drilled on acreage currently controlled by GeoPetro. Based on log analysis, the Company believes this well may have approximately 240 feet of potential net pay in the Stevens zone. There may be an additional 150 feet of potential pay in the Upper Stevens turbidite channel in the Ackerman well; however, due to hole washout an accurate log analysis could not be done. The Machii-Ross Ackerman well was drilled to a depth of 15,078 feet. The Company believes, based on our log analysis, that the well may have been a bypassed producer.
We expect that a well will be drilled, either by us or through a farmout arrangement with a third party, to a depth sufficient to test the Stevens and deeper Carneros zones sometime in 2010. We are in the process of permitting up to three drilling locations on our leasehold.
The Lokern leasehold is in close proximity to the recent hydrocarbon discovery announced by Occidental Petroleum in July 2009. Our prospect is on trend with and located immediately north of the prolific Elk Hills and Tule Elk fields, which have combined reserves greater than 1.5 billion barrels of oil equivalent.
The North Tule Elk Oil Field, which is now part of the greater Elk Hills Oil Field called Northwest Stevens, is the closest analogy to the Company's prospect. This field is located three miles to the south. It has produced in excess of 92 million barrels of oil (MMBO) and 117 billion cubic feet (BCF) of gas from the Stevens sandstone. The Stevens sandstones in this field are at 8,900’, which is 5,600’ shallower than the Lokern Prospect.
Recently Drilled Well in the Vicinity of the Lokern Project
The following well was recently drilled by Occidental of Elk Hills, Inc. (OEHI). OEHI, a subsidiary of Occidental Petroleum Corp., owns and operates the Elk Hills Oil Field and controls a large amount of the mineral rights in the Lokern Prospect area. OEHI also owns a 3D seismic data set that covers the prospect area.
As of August 2009, OEHI has drilled and completed the 65-30 well within the vicinity of the Lokern Prospect but has confidential status; therefore no other information is available. A large capacity pumping unit has been installed at the surface, but is not operating. The OEHI well location is less than one mile from the boundary of GeoPetro's acreage, according to records obtained from the California Division of Oil, Gas & Geothermal Resources.
Occidental Announces Discovery in the Vicinity of Elk Hills
On Wednesday July 22, 2009, Occidental Petroleum Corp. announced it has made what could be the largest oil and natural gas discovery in California in 35 years.
Occidental, one of the largest U.S. independent oil and gas producers, said early indications suggest there are between 150 million and 250 million gross barrels of oil equivalent reserves in the defined area. The discovery was made in Kern County, about 130 miles north of Los Angeles.
The bulk of the discovery's producing zones are conventional oil- and gas-bearing formations. Approximately two-thirds of the discovery is believed to be natural gas.
Occidental said it has an 80 percent interest in the find. Chevron Corp., the nation's second-largest U.S. oil company, holds the remaining interest.
According to Occidental company officials, the aerial geologic extent, which is still being defined, consists of both conventional oil and conventional gas-bearing zones. Additionally, it is probable that there are additional reserves outside the currently defined area as the field limits have not yet been seen.
GeoPetro Management Comments
Commenting on the Lokern Project, GeoPetro's Chairman, President and CEO Stuart J. Doshi said, "California has always been on our radar screen due to its large potential associated with the high-quality, oil-prone reservoirs present in the region and our belief that the deeper potential in the San Joaquin Basin is significantly underexplored. We were able to assemble the land position in our Lokern Project with a modest investment well ahead of Occidental’s announcement. We believe industry interest in this area, on the heels of the recently announced Occidental discovery, should allow us to secure an industry partner or otherwise obtain the necessary capital to undertake drilling and evaluation of our acreage position. Subject to permitting, this should take place next year.
"Pursuing a diverse portfolio of both oil and gas prone reserve targets has been a Company strategy since inception. Adding crude oil potential, or possibly condensate rich natural gas, to our resource mix may help mitigate commodity price risk and may further provide a separate growth vehicle that complements our other properties."
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