Update
For the three months ended September 30, 2011 the Company produced 605 boe/day from the Alexander area, comprised of 187 bbl/day oil & NGL and 2,508 mcf/day of gas. The production split was 31% oil & NGL and 69% gas.
Petro-Reef has tied in its Alexander 09-12-56-27W4 step-out well producing from the Detrital oil zone. The well came on stream on October 26, 2011, and during the first 19 days on production the well has flowed at an average rate of 193 BOE/day (181 BOE/day net) - 151 bbl/day (142 bbl/day net) of oil and 247 mcf/day (232 mcf/day net) of natural gas. Petro-Reef has a 94% working interest in the 9-12 well.
The Company believes that this step-out well in Section 12 confirms that the Detrital oil trend extends west from Section 7 where Petro-Reef has three wells producing from the same zone. The Company has completed the reprocessing of 35 sections of 3-D seismic data on its Alexander lands which has been incorporated into the October 1, 2011 independent reserves evaluation, prepared by McDaniel & Associates Consultants Ltd. Four additional Detrital development locations have been included in the McDaniel Update Report.
Petro-Reef's gross proved plus probable reserves at October 1, 2011 indicated an increase of 12% to 1,771,150 BOE from 1,580,000 BOE at December 31, 2010, after extensions, technical revisions, discoveries, acquisitions, economic factors, and production. After considering the production for the period January 1 to September 30, 2011 of 180,300 BOE, the 2011 reserve additions totalled 371,450 BOE which represents an increase of 24% over the 2010 year end reserves.
Using a 10% net present value ("NPV"), the value of proved plus probable reserves at forecast prices and costs (before income taxes) was unchanged at $34,735,200 as compared with proved plus probable reserves of $34,741,400 as at December 31, 2010.
Petro-Reef's gross proved, probable plus possible reserves at October 1, 2011 totaled 2,623,050 BOE. Using a 10% NPV, the value of proved, probable plus possible reserves at forecast prices and costs (before income taxes) totaled $56,281,100. The possible reserves include four potential development locations targeting the Detrital zone offsetting the Company's recent
09-12-56-27W4 well.
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
• 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
