Amity Oil Acquires Land Position in Oklahoma

Amity Oil Limited has agreed to acquire an initial two parcels of acreage in Ellis County, Oklahoma. This acreage is within the Anadarko Basin which has been a major oil and gas producing area for the USA. Planning is underway to spud the first of an initial two wells programme in Late July/early August. Four adjacent sections of land are currently being pursued surrounding the current acreage for additional drilling locations if the first two wells are successful. In a success case, up to twelve locations will be available for drilling.

History of Area

This area of Oklahoma is an established production area with over 10 producing horizons in the local area. The initial well will be a twin of a well originally drilled in 1970. This original well discovered gas and flowed at a rate of 2.4 MMcf/d, despite suffering significant reservoir damage, from a production test over a 15 foot interval. Other much thicker zones in the well also indicated gas pay, but were too damaged to be effectively tested. This zone was completed and readied for production, but the operator failed to secure a gas contract. Gas was selling at the time for 15 cents/Mcf and after many months, the well was finally abandoned. This zone was never produced. At current gas prices, success even with a modest flow rate will have a rate of return over 100%.

Wells producing from these zones typically produce between 3-10 BCF/section and have flow rates 2-12 MMcf/d with high reservoir and flowing pressures. Amity’s plan is to drill the initial wells using a superior casing design and to also utilise an oil based mud system to protect the formation from damage caused by water based muds. In a success case on the first well, a short horizontal lateral well may be drilled through the target section of the second well to further increase the production rate. Production from the target formation has been shown to be considerably enhanced when reservoir damage is kept to a minimum.

Drilling Plan

This area is the first of three independent, low risk exploration plays being captured by Amity in Oklahoma and Texas. Amity will control a 70% net interest and will be operator of this area. The wells will be drilled to approximately 12,000 feet (3,660 meters). Oil based mud will be used in the lower prospective sections only. Pipeline access is less than 3 kilometers from the well and tie-in times are expected to be less than 90 days. If the first well is successful, we will attempt to drill the second immediately after the completion of the first well.

Exploration Strategy

The first few wells that Amity will drill in Oklahoma are intentionally low geologic risk. We are targeting known productive formations that have proven gas pay. This low risk/low cost approach is designed to establish early success and revenue, which will help fund the ongoing programme. We have completed extensive geological evaluations and are using the latest technology to ensure a successful outcome. Oil based mud systems, horizontal drilling and diesel fracs have been rarely used in Oklahoma at this time. Land acquisition activity is ongoing in our other prospective areas.