Seismic Testing Completed at China North East Petroleum's Durimu Oilfield

China North East Petroleum Holdings has completed the seismic testing of its Durimu oilfield.

China North East Petroleum acquired Sunite Right Banner Shengyuan Oil and Gas Technology Development Co., Ltd. ("Shengyuan") in January 2011. Shengyuan is an operator with exclusive oilfield exploration and drilling rights in the Durimu oilfield in Inner Mongolia. Upon the close of NEP's acquisition of Shengyuan, the Company engaged Hunan Province Mining Geological Bureau Physical Exploration and Survey Team, an independent geological survey partner in early July 2011 and conducted seismic survey work in Durimu from July 20th to September 28th, 2011. The preliminary results show:

Four targeted cap layers from top to bottom, including the Saihantala formation (k1bs), Tenggeer formation second member (k1bt2), Tenggeer formation first member (k1bt1) and Aershan formation (k1ba).

  • The main oil and gas reservoir bed in this area, consisting of the Tenggeer formation second member (k1bt2) and Tenggeer formation first member (k1bt1) are particularly good. The depth of burial is up to 1,800-2,000 meters, which is extremely favorable to the formation and storage of oil and gas.
  • In the cooperated blocks, the structural framework has the feature that the northern part is higher than the southern part and the reflection of the integral structure is clear. The cap layer which reserves the oil and gas has good continuity which meets the requirement to have an oil reserve of large amount.
  • These results are preliminary and the final comprehensive seismic report is expected to be completed by December 2011. The Company will provide more details regarding the data from its seismic test in the future once it receives the final report.

Mr. Jingfu Li, CEO of China North East Petroleum commented, "We are pleased to announce that the seismic testing work in Durimu oilfield has been successfully completed in the third quarter and based on initial data, we are encouraged to see positive preliminary results. Currently, our in-house engineering team is working with our geological survey consultant to develop a preliminary test drilling plan. We plan to commence initial test drilling in the fourth quarter and expect test drilling to last approximately 12 to 18 months. As we've stated in recent months, during this 12 to 18 month test drilling period, any oil produced will be sold to qualified buyers, which will generate revenue and cash flow to further support the Durimu oilfield exploration program. Once the initial test drilling stage is complete, we intend to increase the pace of drilling in Durimu with an expected overall increase in production, which will in turn generate greater revenue and cash flow. We look forward to further discussing our operations and latest developments when we announce our third quarter earnings results."