Shoal Point Confirms Oil in Green Point Shales

Shoal Point has received the preliminary results of a petrophysical analysis from NuTech Energy Alliance Ltd ("NuTech") for the 3K-39 well in the Green Point Shales in the near offshore Newfoundland which has confirmed a thick section of producible unconventional light oil.

Significant hydrocarbon shows were encountered over a gross interval between the surface casing shoe at 400 meters measured depth and current drilled depth of 1745 meters.

The analysis of the 3K-39 logs reflects NuTech's previous analyses of unconventional potential in the Green Point Shales from the Shoal Point 2K-39 and Long Point M16 wells. It shows a similar thick section of hydrocarbon pay and, for the first time, have enabled interpretation of an abundance of fractures throughout the borehole.

This analysis will be updated once studies on core collected in the well are complete and assimilated. Approximately 26 meters of core is being shipped to Houston for 3D image analysis, which will provide valuable information on porosity, permeability and hydrocarbon saturations, as well as images of the internal geometry of fractures. Other core-based studies including rock properties, pyrolysis, and porosity-permeability are being concluded and incorporated in the data set.

A series of open-hole tests are being conducted, prior to completion and stimulation to assess the natural producibility of the formation; these tests are warranted by the high proportion of naturally fractured rock, (seen in core and the NuTech log analysis), the possibility of zones of naturally occurring ("conventional") porosity and permeability and of the presence of oil shows throughout the borehole. These shows include (1) gas chromatography, indicating the presence of liquids over roughly 70% of the drilled section, (2) blue-white fluorescence (indicating light oil) in drill cuttings and cores, particularly after application of a solvent, and (3) mobile, visible oil in fractured core.

Operations have been made difficult by the tectonized and fractured nature of the reservoir and therefore considerable effort and time has gone into keeping the borehole open and in good condition for coring, logging and testing, which has been the principal cause for the delay in operations to date. However, this is a positive sign for the potential producibility of the resource.

The company now expects to proceed to running casing within a number of days and to retain the well for future re-entry and re-completion as a potential producing well.

George Langdon, President of Shoal Point, commented, "Like any first well in a new basin or new play, the operation has met with challenges related to the nature of the rocks. However, the really good news is that, along with very thick matrix pay sections identified now in several wells by our petrophysical specialists, we are seeing a new and important element - pervasive natural fracturing, recognized on various scales - from very fine "spider-web" geometry, all the way up to large scale faults and fractures seen in the field. This fracturing should provide a natural permeability network to complement the artificial stimulation of the formation, which like all resource plays, will be an important part of its development. Operations are continuing on the well to maximize data recovery, and it is expected that the well will be completed shortly."