Solimar Energy Limited: Kreyenhagen Project Area Joint Venture Status & Operational Update

Mon Mar 25, 2013 5:35am EDT

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Solimar Energy Limited

March 25, 2013 - 05:35:00 AM

Solimar Energy Limited: Kreyenhagen Project Area Joint Venture Status &
Operational Update

MELBOURNE, AUSTRALIA--(Marketwire - March 25, 2013) - 


Solimar Energy (TSX VENTURE:SXS)(ASX:SGY) ("The Company" or "Solimar") is
pleased to provide the following status update on the Company's joint venture
activity in the Kreyenhagen Project area and an operational update on the
Company's Kreyenhagen shallow oil field redevelopment project in the San
Joaquin Basin, California.

--  Execution of a binding Farmout Letter of Intent covering the Company's
    Kreyenhagen Field Heavy Oil leases. Solimar will maintain operatorship
    of the project which comprises approximately 12% of the total
    Kreyenhagen Project acreage. Separate discussions continue with other
    potential Farmout partners regarding the Company's Kreyenhagen and
    Monterey shale oil acreage.  
--  Kreyenhagen Field long term production of the lighter gravity, down dip,
    Temblor oil accumulation at stable, low water cut exceeds modeled
    expectations and provides increased confidence for steam enhanced
--  Industry interest in the regional Kreyenhagen and Monterey shale oil
    plays continues to intensify, while California crude oil maintains a
    pricing advantage to WTI crude pricing; Kreyenhagen Field crude oil
    priced at $104/bbl in February 2013. 


The Company signed a Farmout Letter of Intent on March 14th with a well
financed Canadian TSXV listed company for an appraisal and development joint
venture over a 1,720 acres area encompassing the Kreyenhagen Field and trend
acreage (see map below). The initial project phase will consist of the
farminee funding the drilling of four wells, the fracking of two wells and the
compilation of a reservoir model over the shallow Temblor Sandstone heavy oil
reservoir, plus a cash payment to earn 15% working interest (WI) in the heavy
oil project area. The second phase will consist of the farminee funding a
steam enhanced recovery pilot program and thermal modeling in the project area
plus a cash payment to earn an additional 25% working interest (WI) in the
heavy oil leases and 7% working interest (WI) interest in the Kreyenhagen
Shale oil acreage. Solimar will retain majority ownership and operatorship
throughout the program. Further details of the Farmout will be announced after
the definitive agreements are signed and completion of Land due diligence,
which is expected to take three weeks. The agreements are subject to necessary

Concurrently, the Company is continuing discussions with other third parties
towards progressing joint ventures in the regionally expanding Kreyenhagen and
Monterey Shale Oil exploration plays throughout the Company's 12,900 acres in
the play fairway (see map below). This is envisioned as a 3D seismic based
exploration program leading to the drilling of wells targeting multiple
conventional (Temblor, Avenal & Cretaceous sandstones) and unconventional
(Monterey & Kreyenhagen shale) targets at depths less than 12,000 feet. The
Company continues to closely monitor the permitting, seismic and drilling
activity in the area.

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The Company continues to produce from the Temblor Sandstone in the Kreyenhagen
Field 4-33 well as part of a long term production test. The production is from
a recently confirmed down-dip zone of lighter oil (17 degrees API gravity)
that has not historically been produced in the field. Water cut in the well
remains steady at 35%. Oil price for the crude oil sold at Kreyenhagen Field
is $104/bbl as based on February delivery. Significantly, the sustained four
months of oil production at a low water cut as well as the high relative
gravity crude adds increased credibility to establishing a commercial field
development both through expanded primary production and especially steam
enhanced production. The results further substantiate the viability of the
independently assessed contingent recoverable resource (Best Estimate) of 4.2
mmbo in the central 117 acre field area. With the drilling of the planned
farmout appraisal wells, the Company further anticipates delineating a
substantial portion of the undiscovered oil in place resource of up to 24 mmbo
(Best Estimate) and 50 mmbo (High Estimate) along trend in the Company's


For further information on the Company's California activity and plans as well
as recent media reports on the California shale oil potential, readers are
encouraged to access the updated corporate presentation posted to the Solimar
website at which can be found under the Presentations
section in the Investor Centre drop down menu and the media links below.

- Wall Street Journal: California could be the next shale boom state

- CNN Money: California could be next oil boom state

- CNBC: California's Monterey Shale, the next oil boom?

Will Satterfield, CEO of Solimar, commented "We are pleased that increasing
industry interest in California coupled with continued strong California crude
oil prices is reflected in the Company realizing material progress in
discussions with third parties for the Kreyenhagen heavy oil development as
well as the Kreyenhagen and Monterey shale oil exploration programs."

Reader Advisory: Potential resource estimates and forward-looking statements 

This news release contains forward-looking information relating to adding to
reserves and resource estimates, planned development and exploration
activities on the properties in which the Company has interests, and other
statements that are not historical facts. Such forward-looking information is
subject to important risks, uncertainties and assumptions. The results or
events predicated in this forward-looking information may differ materially
from actual results or events. As a result, you are cautioned not to place
undue reliance on this forward-looking information. 

Forward-looking information is based on certain factors and assumptions
regarding, among other things, the impact of increasing competition; the
timely receipt of any required regulatory approvals; the ability of the
Company to obtain qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of the
projects which the Company has an interest in to operate the field in a safe,
efficient and effective manner; the ability of the Company to obtain financing
on acceptable terms; field production rates and decline rates; the ability to
replace and expand oil and natural gas reserves through acquisition,
development of exploration; the timing and costs of pipeline, storage and
facility construction and expansion and the ability of the Company to secure
adequate product transportation; future oil and natural gas prices; currency,
exchange and interest rates; the regulatory framework regarding royalties,
taxes and environmental matters in the jurisdictions in which the Company
operates; and the ability of the Company to successfully market its oil and
natural gas products, and other similar matters. While the Company considers
these assumptions to be reasonable based on information currently available to
it, they may prove to be incorrect. 

Forward looking-information is subject to certain factors, including risks and
uncertainties that could cause actual results to differ materially from what
is currently expected. These factors include risks associated with instability
of the economic environments in which the Company operates or owns interests,
oil and gas exploration, development, exploitation, production, marketing and
transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other producers, inability to retain drilling rigs and other
services, incorrect assessment of the value of acquisitions, failure to
realize the anticipated benefits of acquisitions, delays resulting from or
inability to obtain required regulatory approvals and ability to access
sufficient capital from internal and external sources, reliance on key
personnel, regulatory risks and delays, including risks relating to the
acquisition of necessary licenses and permits, environmental risks and
insurance risks. 

The estimates of resources in this news release constitute forward-looking
information which is subject to certain risks and uncertainties, including
those associated with the drilling and completion of future wells, limited
available geological data and uncertainties regarding the actual production
characteristics of, and recovery efficiencies associated with, the reservoirs,
all of which are being assumed. As estimates, there is no guarantee that the
estimated reserves or resources will be recovered or produced. Actual reserves
and resources may be greater than or less than the estimates provided in this

You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date. While the Company
may elect to, the Company is under no obligation and does not undertake to
update this information at any particular time, except as required by law. 

Resource Definitions 

This discussion has been excerpted from Sections 5.2 and 5.3 of the Canadian
Oil and Gas Evaluation Handbook, Second Edition, September 1, 2007. The
following definitions relate to the subdivisions in the SPE-PRMS resources
classification framework and use the primary nomenclature and concepts
contained in the 2007 SPE-PRMS, with direct excerpts shown in italics. 

Production is the cumulative quantity of petroleum that has been recovered at
a given date. 

Reserves are estimated remaining quantities of oil and natural gas and related
substances anticipated to be recoverable from known accumulations, as of a
given date, based on the analysis of drilling, geological, geophysical, and
engineering data; the use of established technology; and specified economic
conditions, which are generally accepted as being reasonable. Reserves are
further classified according to the level of certainty associated with the
estimates and may be subclassified based on development and production status.

Contingent Resources are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations using
established technology or technology under development, but which are not
currently considered to be commercially recoverable due to one or more
contingencies. Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of markets. It is
also appropriate to classify as contingent resources the estimated discovered
recoverable quantities associated with a project in the early evaluation
stage. Contingent Resources are further classified in accordance with the
level of certainty associated with the estimates and may be subclassified
based on project maturity and/or characterized by their economic status. 

Classification of Resources 

When evaluating resources, in particular, contingent and prospective
resources, the following mutually exclusive categories are recommended:

--  Low Estimate: This is considered to be a conservative estimate of the
    quantity that will actually be recovered from the accumulation. If
    probabilistic methods are used, this term reflects a P90 confidence
--  Best Estimate: This is considered to be the best estimate of the
    quantity that will actually be recovered from the accumulation. If
    probabilistic methods are used, this term is a measure of central
    tendency of the uncertainty distribution (most likely/mode, P50/median,
    or arithmetic average/mean). 
--  High Estimate: This is considered to be an optimistic estimate of the
    quantity that will actually be recovered from the accumulation. If
    probabilistic methods are used, this term reflects a P10 confidence

Company Gross Contingent Resources are the Company's working interest share of
the contingent resources, before deduction of any royalties. 

Company Net Contingent Resources are the gross contingent resources of the
properties in which the Company has an interest, less all Crown, freehold, and
overriding royalties and interests owned by others.

ABN 42 112 256 649

Solimar Energy Limited
Will Satterfield
Chief Executive Officer


Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.