Ivanhoe Energy's California Deep Gas Well Test Disappointing

Ivanhoe Energy says that the test phase of the Aera Energy LLC Northwest Lost Hills 1-22 deep well has begun. Ivanhoe Energy has a 28% working interest in the project, but is not funding any of the cost of the test phase.

The NWLH 1-22 well was flow tested for two days, beginning January 21, which was followed by a pressure build-up. Natural gas rates from the production test were less than expected and water rates were high. A second 24-hour flow test is scheduled for January 25, followed by a 24-hour pressure build up, which will be used to verify the initial test data.

"The test data is still being evaluated, however the initial results are not promising," said Leon Daniel, Ivanhoe Energy's President and CEO. "A final determination by the operator of the future of the project is expected to be made before the end of the first quarter of 2006."

The well is in Kern County, California, and is operated by Aera Energy LLC. Designed to evaluate the natural gas and condensate reserve potential of the deep Temblor formation, drilling of the well began in August 2001 and reached a depth of 21,000 feet in August 2002. Several high-pressure sandstone formations were penetrated during the drilling, indicating the presence of natural gas. Operations were suspended by the operator in 2002 while a partner was sought to share the costs of the testing program. Completion activities were resumed in September 2005. During clean out of the well, natural gas was encountered and flared and the pressure, both downhole and at the surface, was extremely high.

Ivanhoe Energy currently holds a 28% working interest. Ivanhoe Energy originally had a 42% interest in the 9,600-acre block, but farmed out a portion of its ownership in exchange for the cost of testing of the well. Ivanhoe Energy is being carried through the initial completion and testing phase by other partners in the venture.

Ivanhoe Energy is an independent international oil and gas exploration and development company building long-term growth in its reserve base and production. Ivanhoe Energy is a leader in technologically innovative methods designed to significantly improve reserves of oil and gas through the upgrading of heavy oil to light oil, state-of-the-art drilling techniques, enhanced oil recovery (EOR) and the conversion of natural gas to liquids (GTL). Core operations are in the United States and China, with business development opportunities worldwide.