North Peace Spotlights Significant Strides in 2009

North Peace announced operational and financial updates for 2009.

Operations Update

The second cycle of the L1 well has now been on production for 21 weeks. The cycle's Steam-to-oil Ratio ("SOR"), which continues to decrease as production is maintained, is now approximately 4.4. This represents a 45% improvement over the initial cycle. For comparison purposes, our SOR when adjusted for heat content of injected steam equates to a Steam Assisted Gravity Drainage ("SAGD") SOR of 3.7. This adjusted SOR is now equivalent to the current industry average of 3.7 for existing SAGD projects in commercial operations. The production rate to date for the cycle is 29 bbl/d over a period of 26 weeks which includes both steam  injection time and production time.

The revised steam injection strategy on the L1 well is accessing the resource more efficiently and is resulting in significantly improved SOR's. The next cycle will utilize the same strategy with a larger steam slug. The purpose of this next cycle is to demonstrate repeatability but also has the potential for further improved SOR's and increased daily oil rates.

The L2 well was on production for six months and is now shut-in for a pump change. Prior to the pump change the well will be converted to steam circulation to gather additional injection and production data which will help to determine the steaming strategy for this well's second cycle.

2009 Operating Milestones

  • Completed pilot construction in the first quarter
  • Initiated first steam on the L1 well in January
  • Achieved first oil production from the pilot in May
  • Produced cumulative oil of 16,000 barrels from the L1 and L2 wells during the year
  • Approximately 22,000 barrels produced to date
  • Completed the first cycle on the L1 well and started the second cycle
  • Steamed the L2 well and commenced oil production
  • Completed the winter drilling program at Red Earth which consisted of an additional 10 delineation wells to bring the total well count to 27 delineation wells
  • Drilled five conventional exploration wells outside the Red Earth area
  • Three wells (1.6 wells net to North Peace) of the exploration program were successful resulting in 177,800 barrels of Proved plus Probable Reserves and a NPV10 value before tax of $3.7 million

2009 Financial Highlights

  • Working capital of $5 million and no debt as at December 31, 2009
  • Current working capital of approximately $4 million
  • Capital expenditures of $13.9 million during 2009, focused on the completion of pilot construction, pilot operations and the drilling programs
  • The delineation and exploration drilling fully satisfied the flow-through commitment
  • Completed a $11.6 million financing on June 23, 2009 issuing 21.1 million common shares

Louis Dufresne, President of North Peace, commented, "During 2009, we made very significant strides in the development of our project. We completed construction of the pilot facilities, initiated operations and achieved the very significant milestone of first oil in May. Most importantly, we have advanced our understanding of the resource and modified our steaming strategy to the point where we have already achieved a commercial SOR on our L1 well. This accomplishment reached so early in our piloting efforts is remarkable and provides the confidence to continue with our development plan, unlocking the significant value of our Red Earth assets."