Ivanhoe Energy & Derek Oil & Gas Expand Recovery Program at LAK Ranch

Ivanhoe Energy and Derek Oil & Gas have agreed to expand the enhanced oil recovery pilot program at the LAK Ranch field in Weston County, Wyoming.

The pilot steam flood in the LAK Ranch field will be expanded with the drilling of three steam injection wells. This expansion follows completion of a 3-D seismic survey of the area and a thorough interpretation of the survey results. The new wells will provide for continuous injection of steam above the existing horizontal wells. The pilot program to date has consisted of three cycles of steam injected into a horizontal producing well. Temperature has been monitored in an adjacent horizontal well, located approximately 25 feet above the injection well. Oil production has increased with each cycle and is currently about 20 barrels per day following the third steam cycle.

The LAK Ranch field, originally discovered in the 1920s, covers approximately 7,500 acres in the Powder River Basin. Thirty wells have been drilled by several operators to define the significant oil in place for this project, and a number of small scale attempts have been made to economically recover the oil. Ivanhoe Energy believes the use of horizontal wells and continuous steam injection offers the most promising chance of success and some encouraging results have been achieved to date. The pilot expansion is expected to be completed by August pending drill rig availability.

Ivanhoe Energy currently holds a 39% interest in the project and Derek Oil & Gas holds 56%, with 5% held by another party. Following the pilot phase, Ivanhoe Energy has the option to increase its working interest to 60% by providing additional capital toward the initial development phase for a total of US$5 million, including the amounts spent on the pilot phase. Should Ivanhoe Energy elect not to proceed beyond the pilot phase, its working interest will be reduced to 15% and Derek Oil & Gas will become the operator.