Update

On July 15, 2010, Petro-Reef announced that it received regulatory approval for the construction of a 4.0 mmcf/d amine facility in Alexander. Construction is scheduled to be completed by the end of August, allowing for Petro-Reef to bring onstream approximately 300 boe/d, including 150 - 200 bbls/d of crude oil currently standing behind pipe.

In anticipation of regulatory approval for the amine facility, Petro-Reef obtained approval for four drilling locations and is in process of obtaining approval for two additional development oil drilling locations. Petro-Reef intends to commence drilling its first well in July 2010, with two to three follow-up locations to be drilled in early August 2010.

Alexander/Qui Barre

• Approximately 40 gross (37 net) sections
• 99% of production / reserves
• 85% average working interest
• Operated
• Own key infrastructure
• 65% Freehold lands (lower royalties vs. Crown)
• Multi-zone exploration and development oil and gas potential

 

Seismic Control

• Extensive proprietary 3-D seismic coverage over most of Petro-Reef’s acreage with significant 2-D coverage over the southern acreage

Multi-Zone Potential

• Seven potential horizons available in the area:
- Wabamun B
- Wabamun A
- Detrital
- Basal Quartz
- Calahoo
- Barrhead
- Upper Cretaceous Belly River
• Currently producing from seven different horizons in Alexander

Development Oil – Wabamum “B”

• Thick sucrosic dolomite bank development ranging in gross thickness from 50 to 100 feet
• Up to 50 to 60 feet (gross) pay per section
• 26 degree API sour oil zone
• Present over 75% of Petro-Reef’s Alexander / Qui Barre acreage in two separate bank complexes
• 20+ drilling locations identified with over 1,000 boe/d of production potential
• Three wells (one on each reef) to be drilled in the next three-four months
• Five sections approved for downspacing

Development Gas – Basal Quartz

• Northwest-Southeast trending beach sand development
• Up to 80 feet thick
• Highly porous (28%), permeable clean sand
• Analog well AOF (absolute open flow) tested at 11 MMcf/d, currently producing 2.0 MMcf/d with minimal pressure drop after 4.25 years
• Produced 3.2 bcf with 2.7 bcf remaining

Development Oil – Calahoo

• Immediately overlying the Basal Quartz “A” zone
• Gas production in southern acreage with oil production immediately north
• High quality 35.6 degree API oil
• 50 boe/d typical well
• 20+ locations identified with over 1,000 boe/d potential
• Application for downspacing of five sections approved by the ERCB

Detrital Channel

• Recent exploration success identified significant Detrital oil discovery
• Discovery well tested at over 250 bbls/d of crude oil and 1.0 MMcf/d
• Discovery well on freehold lands (10% royalty)
• Production addition of 200 boe/d (100 bbls/d crude) expected in Q3 - 2010
• Follow-up locations identified, using proprietary 3-D seismic to be drilled in second half 2010

Exploration Upside – Northern Block

• Largely contiguous land spread (majority freehold) (100% WI)
• Significant exploration drilling success in 2010
o Two wells currently producing at 225 boe/d (100% WI)
• Several follow-up development locations identified
• Two high-impact exploration locations scheduled to be drilled in 2010
• Seismically defined by large proprietary 3-D seismic survey