Solimar Energy Limited: Kreyenhagen Project Area Joint Venture Status & Operational Update
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Marketwire 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) - NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES 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 production. -- 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. JOINT VENTURE ACTIVITY 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 consents. 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. To view the "KREYENHAGEN AREA ACTIVITY & SOLIMAR ACREAGE" and the "NORTHERN SAN JOAQUIN BASIN KREYENHAGEN & MONTEREY SHALE OIL PLAY ACTIVITY" figures, please visit the following link: http://media3.marketwire.com/docs/862112_maps.pdf. KREYENHAGEN FIELD OPERATIONS UPDATE 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 acreage. CORPORATE PRESENTATION & LINKS TO RECENT MEDIA REPORTS ON CALIFORNIA SHALE 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 www.solimarenergy.com.au 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 (http://online.wsj.com/article/SB10001424127887323353204578128733463180210.html) - CNN Money: California could be next oil boom state (http://money.cnn.com/2013/01/14/news/economy/california-oil-boom/index.html) - CNBC: California's Monterey Shale, the next oil boom? (http://www.cnbc.com/id/100480051) 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 presentation. 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 level. -- 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 level. 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 FOR FURTHER INFORMATION PLEASE CONTACT: Solimar Energy Limited Will Satterfield Chief Executive Officer 1-805-643-4100 www.solimarenergy.com.au 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.