Eureka Disappointed with Turkish Test Results

Eureka Energy Ltd. said that the operator of the Koyunlu-1 well in southeast Turkey reported that acidization and testing of the upper Garzan Limestone Formation has been completed. After acidization, 579 barrels of water with minor heavy oil cut, decreasing with time, were recovered by swabbing.

The well has been suspended pending a decision on further testing and the rig has been released.

The test results have been disappointing considering the impressive oil shows obtained during drilling and the indications of hydrocarbons from wire-line log interpretations. The tests suggest that the Garzan fractured limestone reservoir at this location, has a column of heavy oil which may not be capable of production due to a combination of low reservoir permeability and high oil viscosity.

The well has been suspended so that the option to conduct further tests, possibly with different equipment, is available should the joint venture decide to do so.

Despite the disappointing result in Koyunlu-1, the presence of heavy oil provides encouragement for exploration for producible oil that may be trapped up-dip of the well in structural culminations. The Koyunlu-1 well is located approximately centrally in a 25-kilometer long trend of structural highs at target Garzan and Mardin Formation level.

The Joint Venture is presently considering the acquisition of new seismic data to be able to locate the second earning well for Eureka on a structural closure, up-dip of the heavy oil column in the Koyunlu-1 well.

Eureka has acquired farm-in rights to earn a 20% interest together with an option to increase its interest to 45%, in two adjoining exploration licenses covering about 500 square kilometers in South East Turkey. The Koyunlu-1 well was the first of two farm-in wells to be drilled in the licenses.

The licenses are owned by Arar Oil and Gas Inc, a Turkish exploration and production company with a drilling and oilfield operations arm. Arar has offices in Ankara Turkey and in Houston Texas. Arar has extensive experience in drilling and completion of oil wells in the South East Turkey region.

The Koyunlu-1 well is located approximately 17 kilometers south of the West Raman oil field (original oil in place 1.5 billion barrels) in the major oil producing region of South East Turkey.

The Koyunlu-1 was located to test the eastern portion of a major structural trend with similarities to the West Raman - Raman oil field structural trend. The target reservoirs are Cretaceous age carbonates of the Garzan Formation and the underlying carbonates of the Mardin Group. These are the same reservoirs that host oil in the nearby Raman fields and numerous other oil fields in the region. The Mardin Formation was not drilled in Koyunlu-I but remains as a valid target in future drilling.

The oil produced from the Garzan Formation in the Raman fields is relatively heavy (13-18 API gravity), however this oil is readily saleable at a small discount to standard Middle Eastern Crude prices.

The Turkish Petroleum Law was changed on the 18 January 2007 and, among other things reduced the Turkish Government royalty on petroleum production to 1.7% on the first 1000BOPD. The Turkish company tax is 20%.