Source Hits Pay at Harmon Valley

Source Petroleum Inc. said that its first test well—HZ Peace River 1-29-83-19 W5M--encountered more than 20 meters (60 feet) of high-quality reservoir section saturated with heavy oil in the Blue Sky formation at Harmon Valley, Peace River oil sands district, Alberta.

The drill program confirmed an excellent oil saturation section of the Blue Sky formation. Core porosity and core permeability averaged 36 % and 5100 md, respectively. Oil quality in the reservoir section Observed API ranged from 8 to 9 API.

Approximately 17.5 bbls of heavy oil were produced via cold flow on a limited test. The testing of the well was limited, restricting higher volumes and the ability to change to a bigger pump due to spring break up and poor road conditions.

A longer term test using a larger pump of the horizontal lateral at 100/01-29-083-29 W5M/0 will resume when road conditions permit.

Total fluid produced during the production test was 231.8 m cubed. It is interesting to note that the well produced approximately 170 m cubed of water before significant indication of oil. It is also interesting to note that the fluid level continued to drop throughout the test meaning if the water deliverability was high the fluid level would not have dropped as significantly.

The first well of the proposed program, HZ Peace River 1-29-83-19 W5M, targeted the Bluesky - Gething formation. The Core information and a horizontal leg will assist in developing a plan for a possible primary and secondary oil recovery scheme.

AJM has assigned a contingent resource of 247 MMbbls and a [p10] case of 323 MMbbls on the Harmon Valley heavy oil asset situated in the Alberta Peace River Arch heavy oil district.

Furthermore, the report conducted by AJM was prepared prior to the drilling of the first horizontal well on the property which is currently under evaluation and the Company looks forward to providing a new engineering report as early as possible.

Preliminary economics by AJM, based on only 5% Cold flow recovery and 12.5% SAGD recovery have been assigned a Net Present Value [discounted at 10% [NPV10] at forecast price of $217.5 million.

Ultimate recoveries of 40% - 70% using Cold flow and SAGD may be achieved of the total oil in place as an industry average in heavy oil.

Source Petroleum Inc., with 50% participation interest, along with its joint venture partner are targeting operations in the same Blue Sky Gething formation with potential ooip reserves of up to 320 million barrels.