Masters Announces Enhanced Oil Recovery Project

Masters Energy Inc. has contracted an engineering consulting firm, specializing in enhanced oil recovery, to evaluate the Company's oil producing property at Little Bow, Alberta. The Little Bow property has produced for a total of 30 years and has been under waterflood for 25 of those years. The Company currently produces 700 barrels per day of crude oil at Little Bow.

Core studies to date, indicate that an Alkaline Surfactant Polymer ("ASP") flood could significantly enhance the recovery of oil. The consultant has completed a fluid study and an initial core analysis that indicate the ASP fluids are compatible with the fluids and rock characteristics of the Little Bow reservoir and that the reservoir is a very good candidate for an ASP flood.

Masters' 2006 year end reserve evaluation, performed by McDaniel and Associates, estimates that the pool contains approximately 30 million barrels of original oil in place, of which, approximately 36 percent of the original oil in place has been recovered to date. McDaniel, further estimates an additional 9% (to a total of 45 percent) of original oil in place is ultimately recoverable under the current waterflood program.

The ASP flood is designed to decrease interfacial tension and improve the vertical sweep efficiency, resulting in higher ultimate oil recovery than would be achieved with the existing waterflood. Analogous oil reservoirs have experienced incremental oil recoveries between 12 and 25 percent of original oil in place. Similar performance at Little Bow would potentially increase incremental recoverable reserves by 3.6 to 7.5 million barrels (2.8 to 5.8 million barrels net to Masters). McDaniel did not assign any reserves to the ASP project in their latest corporate reserve evaluation (December 31, 2006). Analogous pools, utilizing the ASP floods, tend to increase daily production by 4 to 7 times initial rates within 2 to 3 years of injection.

The next phase of core work will more accurately determine the expected incremental recovery by implementing the ASP flood. The results should be available in the third quarter.

Initial capital cost to implement the ASP flood is estimated to be $15 to $18 million. Assuming the necessary regulatory approvals are received on a timely basis the following schedule is envisioned:

  • Facility construction - fourth quarter 2007 to first quarter 2008
  • Start of ASP injection - second quarter 2008
  • Initial production response - third quarter 2008
  • Peak production – 2010

Masters Energy Inc. is an Alberta based corporation engaged in the business of acquiring or exploring for and developing oil and natural gas reserves in western Canada.