Strategic American Completes Waterflood Leasing, Initial Reservoir Analysis

Strategic American Oil completed primary leasing for its Waterflood North prospect in the Illinois Basin and has received an initial independent engineering report on the first of three target zones by Stewart Producers, Inc. of Mt. Vernon, Ill. This preliminary independent engineering report shows the potential for economic oil production and will allow Strategic American Oil to move the project to the next stage of development expeditiously.

The independent engineering report agrees with Strategic American Oil's supposition that the Waterflood North prospect, which is in a previously producing oil field, could host significant in-place reserves through waterflood recovery. By researching the Illinois State Geological Survey, the Company has discovered the oil field previously produced an aggregate of approximately 1.6 million barrels of oil. Nearby waterflood operations in the same zones have yielded recovery rates of 80% of primary production. "Waterflood" is an oil extraction method where water is pumped into injection wells displacing oil in the reservoir formation and forcing the oil into recovery wells. This method is used to recover remaining oil in place following primary production methods.

Company President and CEO Jeremy Driver stated, "Having the leasing and initial reservoir analysis complete furthers our confidence and ability to develop this project with the goal of generating significant cash flow for the Company. We are enthusiastic that this initial analysis is only based on one of the three target zones identified on this field. We are now working with Barger Engineering to design the pilot waterflood operation for this project, which, if proven, would be expanded into full-scale commercial operations in the near term."

The Illinois Basin is a mature oil producing environment with a production history covering over 100 years. This development history has generated a large database including records for more than 180,000 wells. Strategic American Oil is working to grow its reserves and analyzing these historic records minimizes cost while identifying exploration and historical production targets to meet that growth. To date, the Company has leased over 2,000 acres in Illinois through utilizing these records. Finding and leasing this waterflood project demonstrates the value of these historic records and the Company's expertise in managing those records.

Illinois operations are being led by Strategic American Oil Corporation's Chief Geologist Jim Thomas, who has approximately 30 years of experience in the Illinois Basin, and a BS and MS from South Illinois University.

Koliba No. 2 Post Drilling Summary

The Company has also completed drilling its first Koliba prospect in Victoria County, Texas. The Koliba No. 2 was drilled to 6,880 feet to evaluate three Frio sand objectives and found the well to be uneconomic and therefore was plugged and abandoned.

To summarize drilling operations, Strategic American Oil Vice President of Operations Steven Carter said, "While it was somewhat disappointing that we did not complete the Koliba No. 2, the information gained from drilling this well has pointed us to a new location that has the potential to be better than the original. Economically speaking, the money saved by not completing the No. 2 will be better spent on the drilling of a more optimal well location. We remain encouraged about the future development of this prospect."


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