Deer Creek Energy Begins Phase I of the Joslyn SAGD Project

Deer Creek has started its Steam Assisted Gravity Drainage (SAGD) operations at its Joslyn Oil Sands Project Phase I plant. Deer Creek further advises that a 195 well program and a 100 kilometer geophysical program have also been successfully completed on schedule and under budget.

Glen Schmidt, President & CEO of Deer Creek, noted "The start-up of Phase I is a significant milestone in the development of the Joslyn Oil Sands Project and the completion of our winter drilling and seismic programs has further defined and confirmed the Joslyn resource".

Deer Creek's multi-phase development plans include three phases of SAGD development prior to the start of mining operations. The initial Phase I includes one SAGD well pair with a 600 barrels of oil per day facility. Infrastructure constructed for this phase included 17 kilometres of natural gas pipeline and 45 kilometres of water source and disposal lines. This infrastructure will meet the needs of Phase I as well as future development in Deer Creek's multi-phase plan.

The Joslyn Project is located northwest of Fort McMurray, Alberta. Steaming of the Phase I well pair began on April 10th, 2004 and will continue for approximately three months to mobilize the bitumen prior to initialization of production. Production from the well is expected to begin in the second half of the year and reach its peak rate of 600 barrels per day by mid 2005.

Deer Creek has worked closely with the engineering, procurement, construction & management firm, Bower Damberger Rolseth Engineering Ltd. (BDR) to manage the facilities design, construction costs and project scheduling. Deer Creek's goal of effectively implementing modular construction practice has been demonstrated. The total facility cost is projected to be 20 percent or $4.0 million less than the original budget. The total cost for Phase I including the well pair, facilities and infrastructure is estimated to be $23.6 million.

Mark Montemurro, Vice President Thermal Operation noted, "Cost control is key to effectively executing projects in the oil sands. Together with BDR, Deer Creek has demonstrated how increased front end engineering and facility modularization can result in projects being successfully executed on schedule and within budget".

In addition, Deer Creek successfully completed its winter lease evaluation program including a 195 core-hole and utility well program and 100 kilometers of geophysical data. Project execution by Deer Creek's operating staff resulted in per well costs being reduced by 9 percent compared to the previous year. The total project well inventory now exceeds 560 wells with more than 1,000 kilometers of geophysical information.

Deer Creek Energy Limited is a Calgary based, privately held oil sands development company with interests in both steam assisted gravity drainage (SAGD) and mining assets. Deer Creek has an 84 percent working interest in and is operator of over 50,000 acres in Oil Sands Lease No. 24 and Permit 70, collectively known as the Joslyn Project. With over 7 billion barrels of bitumen in place, production and recoverable resource potential is estimated at more than 200,000 barrels of oil per day and 2 billion barrels, respectively.