Patch Adds New Alberta Oil and Gas Prospect

Patch International Inc. has entered into a participation agreement with Vanguard Exploration Corp. to farm-in on a Banff/Leduc oil and gas prospect located in the Rich/Rumsey area of Alberta.

Vanguard said Friday morning that it has signed a drill contract. At press time, the company was expecting a test well to commence by Sunday in a $1.5 million, 2-week, drill program.

The test well will penetrate the Banff formation at an estimated depth of 1,494 meters. The 6-9 test well has been seismically identified and interpreted to indicate a fractured Banff gas zone, which is structurally higher than the regional Banff. It is believed the regional shales and marlstones will have been replaced by porous limestone and dolomite, creating a reservoir-quality zone. The test well will also test a Leduc seismic anomaly for oil at an estimated depth of 2,047 meters. The Leduc anomaly is interpreted to be an isolated and dolomitized reefal build-up typified by other producing pinnacle reefs in the area.

Under the terms of the agreement, Patch will pay a prospect fee to cover a share of seismic and land acquisition costs incurred by Vanguard and will acquire outright an undivided 26.25% working interest in a quarter section of mineral rights below the base of the Viking formation to the base of the Mannville formation.

Patch will also participate in the drilling of a D3 test well covering P+NG mineral rights below the base of the Mannville formation for a 35-percent working interest to earn an undivided 21-percent working interest after payout in the test well and farm-out lands in one section with an option to drill an option well on the same terms in an adjoining section. In addition, an area of mutual interest has been established in which Patch has a 26.25-percent participating interest.

"Given the extremely short timetable to drilling and our active 2006 oil and gas program, which includes our recently drilled and completed Halkirk project, our management team had to make a rapid assessment of this opportunity,” said John Thornton, Patch’s president. “The seismic analysis, proximity to successful production, the track record of Vanguard, and the multi-zone potential for oil and gas in this prospect is very attractive. While high-risk, a successful drill program has the potential to have an immediate, significant impact on our company's oil and gas production."

Patch is a junior oil and gas company that currently earns oil revenue from a small participation interest in 20 oil wells. These wells provide the company with some short- and long-term cash flow. Patch has drill programs planned on five properties in Alberta scheduled for 2006. The company also has oil sands properties in the heart of the Alberta Oil Sands, owned through its majority ownership of Patch Oilsands Limited Partnership, on which it plans a limited work program in 2006.