Orchard Moving Ahead with Southeast Lost Hills

Orchard Petroleum Limited and Orchard Petroleum Inc. have completed the process of becoming the Operator of the Southeast Lost Hills (SELH) project for both the oil and gas projects along with acquiring additional acreage and working interest from Nahabedian Exploration Group, LLC (NEG). The SELH project contains the Jack Hamar gas discovery which was appraised last year and the deep oil discovery which commenced testing this year.

A new extensive work program to develop both the oil and gas potential across the expanded acreage position has been developed with our partners, Nuenco NL (Nuenco).

For the gas development, the new work program involves a three phase approach. First, we will thoroughly test the existing five completed gas wells and determine sustainable gas deliverability from the multiple potential gas intervals in each well. Second, install already obtained production facilities along with completing a pipeline to an identified gas customer. And thirdly, continue to evaluate drilling opportunities and the best approach to develop the extensive acreage position.

All these processes will help in a speedy determination of recoverable gas reserves from the shallow gas discovery.

For the Monterey oil development, our work program will involve further testing of the Jack Hamar 1-1 well. Oil production from the 1-1 well has already been established over one interval after a single stage hydraulic fracing. Additional zones covering more than several hundred feet each are to be tested.

Part of the Monterey oil evaluation has included petrophysical research by Nuenco's consultants over the area using available well data from nearby producing wells. Their analysis indicates that the Monterey formation provides a larger target in terms of potential oil in place than previous estimates for our large acreage position.

The SELH Project has tremendous potential for both oil and gas development. It has also been extremely frustrating not to be able to move ahead with the project until just recently. Now that operatorship is in hand, a comprehensive plan put in place and strong support between partners established, we believe that a very significant step forward has been made in establishing the very large potential of the project.

The five shallow gas wells already drilled and completed provides an excellent base from which to establish gas deliverability. A partial completed pipeline, production facilities already acquired and a very cooperative gas buyer gives us all the ingredients to make quick progress. Any development of the shallow gas will add to Orchard's other projects which are also in the process of ramping up production and continue to build on Orchard's growing production base.

The Monterey oil potential is substantial. Extraction techniques will be the key to unlocking this vast resource in the energy dependent California market where excellent infrastructure is already in place.

Orchard's experience in extracting oil and gas from the Diatomite at our South Belridge project gives us a strong analogy from which to establish a similarly successful program at SELH.