Pacific Stratus in Deal for Sipetrol Assets

Pacific Stratus Energy recently signed a memorandum of understanding with Empresa Nacional del Petroleo, the national oil company of Chile. The MOU initiates exclusive negotiations for a limited period of time that may lead to the acquisition of certain interests owned in Colombia by Empresa's wholly-owned subsidiary, Sipetrol, subject to the execution of a definitive stock purchase agreement.

Sipetrol has interests in several blocks and oil-producing fields in Colombia. These include a 90.6% interest in the Dindal and Rio Seco Blocks and a 27.27% interest in the Caguan Block, where the Guaduas and Rio Ceibas are producing fields of approximately 7,200 barrels of oil equivalents per day, on a gross basis. Guaduas produces 18.5 degrees API gravity oil and Rio Ceibas produces 22 degrees API gravity oil from upper sands and 23 to 32 degrees API gravity oil from the basal sands. An updated independent reserve report to be prepared by Petrotech Engineering will be completed later this month. Commenting on this acquisition, Manfred Kruger, Chairman of Pacific Status stated, "This transaction transforms Pacific Stratus from an exploration company with great production potential to a production company with great exploration potential."

Pacific Stratus contends that secondary recovery processes from these fields could potentially enhance the recovery of reserves in the fields. Marino Ostos, the company's President noted, "We believe the potential for increasing production and reserves from these fields is excellent and look forward to working with our new partners in these fields."

Sprott Securities has been retained Pacific Stratus as financial advisor on this transaction and related financing. The transaction, which is subject to regulatory and shareholder approval, is expected to close in the second quarter.

Pacific Stratus also gave an update of developments at its other properties.


It reports that it has struck oil in the Puli-7 well located in the Puli-B Block, where Pacific Stratus has earned a 50% participation right with Mercantile Colombia Oil and Gas. The completion of this well has fulfilled Pacific Stratus' commitments to Mercantile with the result that each company will now have a 50% interest in further discoveries.

Drilling commenced on December 12, 2005, and final depth of 4,707 feet was reached on January 3, 2006 with frequent oil shows in the Guaduala and Monserrate Formations. On January 4, the well was logged and the petrophysical evaluation defined four hydrocarbon-bearing intervals. Three of these intervals are located within the Monserrate Formation at depths of 4,412 to 4,428 feet, 4,433 to 4,486 feet, and 4,500 to 4,509 feet, respectively. The fourth hydrocarbon-bearing interval was within the Guaduala Formation at a depth between 4,203 feet and 4,223 feet. Between January 7 and 10, 20 reservoir fluid tests were conducted on these intervals and a static gradient for oil was obtained.

On January 12, a natural flow test from the intervals in the Monserrate Formation accumulated 118 barrels per day of 33 degree API light oil. The well was completed and production started on February 9 after the approval of the production facilities by the Ministry of Mines and Energy. The initial production from the well was 110 barrels per day, and the companies are planning to complete a fracturing workover and to carry out a chemical treatment to dissolve parafin that was precipitated in the reservoir during almost a month of inactivity. These initiatives may increase production to at least 300 barrels per day, as has been the case in the nearby Puli-3 well.


Drilling of the Mauritia-1 well in the prolific Llanos Basin in Colombia has commenced as part of the company's obligations under the Moriche Exploration and Production Contract where the company has a 60% working interest in the Moriche joint venture. Partners Petrocol and Geoconsult each have a 20% working interest.

The depth of the first targeted reservoir, the Eocene Mirador Formation, is estimated at 8,000 feet. It is expected that drilling will be completed shortly. The well is located in the Llanos basin, the most prolific petroleum province of Colombia. The field has been successfully tested with the nearby currently producing La Punta and Rancho Hermoso oil fields. Based on these analogs, Pacific Stratus Energy believes an initial production of 1,200 barrels per day of medium to light oil is possible.

Don Pedro-1

As reported on December 23, 2005, HOCOL has challenged Pacific Stratus' rights with respect to the farm-out arrangement. The company is actively pursuing its legal rights through the mechanisms established in the agreement.

In a news release dated February 1, 2006, Maurel & Prom, HOCOL's parent company, stated "that the Don Pedro-1 exploration well was completed at the end of December 2005. It has reached a total depth of 3,620 feet and has vented gas from the Upper Cretaceous sandstone in the Monserrate formation. Stabilized output from the well on a 1/2 inch choke was 5.9 million cubic feet of gas per day. Total column of the reservoir is 42 feet. The petro-physical characteristics of the reservoir are good with an average porosity of 17% and permeability reaching 2 Darcies. The discovery extends into the adjacent block named Ortega, which is also operated by Hocol under a production-sharing contract with Ecopetrol, the Colombian national company."

Pacific Stratus Energy is an oil and gas company with interests in the Doima block and Ortega-Pacande oil fields, as well as in the La Creciente, Moriche and Puli-B exploration blocks in Colombia. The company is focused on identifying acquisition opportunities primarily within the upstream Sub Andean basins, initially in Colombia.