Culane Announces Nelson Test Results

Culane Energy Corp. said that production testing commenced June 7 on its directional well located at Culane Nelson 7-26-45-25 W4M in Central Alberta.

Culane perforated a Lower Mannville zone and began swabbing operations. The well swabbed 100% clean oil over a 48-hour period at the rate of approximately 70 barrels of oil per day. On June 14, a second Lower Mannville zone was perforated and evaluated. After a 96-hour initial test, natural gas flowing rates had stabilized at 5 million cubic feet per day (830 barrels of oil equivalent per day) with a flowing tubing pressure of 843 kilopascals (122 pounds per square inch) on a 1 1/4-inch choke. A slight oil mist was noted with the natural gas production.

Pressure recorders will be run and a bottom hole test will be conducted over the next two weeks. As previously reported, Culane's Nelson 10-26 horizontal well had flowed oil and natural gas to surface at a rate of approximately 1,030 barrels of oil equivalent per day (50% oil, 50% associated natural gas).

Operations are underway to tie-in both the 7-26 and 10-26 Nelson wells for production. Once the new Nelson wells are on production, Culane will be capable of producing oil and natural gas at the rate of approximately 1,900 barrels of oil equivalent per day (55% oil, 45% natural gas).

Looking forward over the next 9 months, Culane intends to carry out a $21 million work program focused mainly on its Nelson and Killam South core areas. The company's recently drilled and tested Nelson wells at 7-26 and 10-26 are the first wells drilled as part of this ongoing work program. Culane intends to drill two horizontal oil wells and two vertical test exploration wells at Nelson in the fourth quarter of 2006. Culane has an additional 5 horizontal well locations identified at Nelson.

At Killam South, Culane will be acquiring high-resolution 2D and 3D seismic over three sections of land in late July. As the first stage in the development of Killam South, Culane plans to commence the drilling of up to 10 multi-leg horizontal oil wells and two vertical salt-water injection/disposal wells in September.

Also included in the Killam area work program will be the drilling of two multi-leg horizontal oil wells at Culane's Killam North Upper Mannville "F2F" pool. Depending on availability of services Culane may expand its work program in both these core areas.

Culane owns a 100% working interest and operates the Nelson and Killam South properties. Culane owns a 50% working interest and operates the Killam North Upper Mannville F2F pool.

Culane is a junior oil and gas company engaged in the exploration, development and production of oil and natural gas in Alberta.