Derek: Steam Injection Begins at LAK Ranch

Derek Oil & Gas Corp. said that upgrades and safety maintenance on the 27-million-BTU generator are complete and steam injection has commenced on Derek's LAK Ranch project in NE Wyoming.

On Thursday, May 10, with the steam generator servicing and upgrades complete, the steam injection process was initiated at LAK Ranch. Steam is currently being injected into six wells, the two pre-existing vertical injectors up dip from the pre-existing horizontal well and the four new producer wells to the south. Steam will be injected on a temporary basis (three weeks) into the four new producer wells to the south, at which time the temporary steam injection lines will be moved to allow temporary steam injection into the four new northerly producer wells. The purpose of injecting steam into the new producers is to heat up the formation adjacent to the well bores to facilitate viscosity reduction of the oil and ultimately increase initial production rates. It is anticipated that the four new southern producers will be on production this summer.

Well completion activities, including perforation of the four new northern producer wells, laying of production lines and installation of new facilities continue on the project. Perforation intervals for the four new injector wells will be determined this week by Derek's consultants and perforation of the new injector wells will follow.

The completed 12 vertical well program totaled a depth of approximately 13,540 feet. The program consists of a pattern of four injector and eight producer wells targeted to produce from the Newcastle sandstone formation. Well placements were selected based on targets identified using Derek's $1.1 million USD, high definition 3D seismic survey completed over 2880 acres (4 1/2 square miles) of the 8000 plus acre LAK Ranch property.

This 12-well program is being conducted jointly with a third party on a fifty-fifty cost basis, with the third party receiving 50% of the revenue until payback on their initial investment is met. Once payback is met, the third party's revenue interest (on the 12 well program production only) will revert to a 40% working interest. Derek has a 95% working interest in any current and future development and production on the property outside of this 12 well program area and therefore will receive its 95% from any additional production from the current horizontal producer well. Derek holds a 4.42% royalty on all produced oil.

Derek Oil & Gas Corp. is a Canadian-based, publicly traded oil exploration, development and production company that utilizes enhanced oil recovery (EOR) techniques to develop new production from reservoirs in North America. Derek's current focus is on the further development and increasing production from their prime property located in NE Wyoming's prolific Powder River Basin.