VANCOUVER, British Columbia, Feb. 7, 2005 (PRIMEZONE) -- Montana Oil and Gas Inc. (Pink Sheets:MOGI) would like to present the following project description with regards to its Sylvan lake oil and gas lease.
Peter Sanders, Montana Oil and Gas President noted, "After overwhelming curiosity from shareholders and potential shareholders concerning the Sylvan Lake area, and how the company's partners came to acquire such coveted land, I am happy to be able to present this project description in great detail."
Project Description and Discussion
Project History
The Sylvan Lake oil and gas field was discovered in the late 1950's and has produced over 40 million barrels (mbbls) of high quality crude oil and 50 billion cubic feet (bcf) of associated natural gas, predominantly from the Mississippian Pekisko and Shunda formations. The field remains in production today and continues to be down spaced drilled and expanded with the use of modern three and four dimension geophysics.
The original freehold lease on section 3-38-3W5M was leased to a major oil company, as was most of the Sylvan Lake field itself. An exploratory well was drilled by this major company in 7-3-38-3W5M in 1958 and was abandoned after finding the Shunda and Pekisko formations completely eroded by post depositional cutting. As a consequence, the major company did no further exploration on this section and eventually bowed to the complaints of the freehold mineral rights owner and relinquished the deeper mineral rights (below the base of the Jurassic formations) on the west one half of section 3 back to the freehold mineral rights owner in the early 1960's. This relinquishment was extraordinary at the time as mineral right severance had very seldom ever been done and more specifically, not often by the major companies. Accordingly, these mineral rights sat available and dormant until the early 2000's as almost all oil and gas companies thought they were held by the original lessee. Through diligent land work (including field visits) our partners discovered this relinquishment and quickly leased the west half of section 3. Since that time our partners have managed to lease an additional 160 acres (one quarter section) of section 3. Energy 51 has the right to earn 50% of this prospect (possibly 75%) with the drilling of a test well in 5-3-38-3W5M.
Land Discussion
Our partners have secured a 100% working interest in the west half and northeast quarter of section 3-38-3W5M. The land comprises some 480 acres (one section or one square mile equals 640 acres). Primary drilling spacing in Alberta is as follows; one quarter section spacing (160 acres) for oil and one section spacing (640 acres) for natural gas. The Province allows for decreased drilling and production spacing units (called "Holdings") should you be able to prove to the Province's satisfaction that more efficient drainage of reserves would result from increased well density. Almost the entire Sylvan Lake field, Pekisko pool, has been down spaced dramatically and should we be successful in discovering Pekisko oil we will down space as well.
Play Types
This prospect has the potential to encounter both oil and gas in several (5) Mississippian rock formations. Locally, the Mississippian formations are called the Shunda and Pekisko with the Shunda being the youngest of the rock formations. The test well to be drilled at 5-3-38-3W5M should encounter the Shunda formation at approximately 2,175 meters drilled depth and the Pekisko formation at approximately 2,225 meters drilled depth. Total depth will be approximately 2,300 meters drilled depth.
Geologically and geophysically, we anticipate finding preserved Shunda and Pekisko formations structurally high to the surrounding rock. Further, we anticipate that this structural feature should have been stratigraphically altered by sub aerial exposure, which would have enhanced both porosity and permeability.
Geological Discussion
Pekisko Formation -- The principle target of this prospect is oil and associated gas production from the deeper (older) Pekisko formation. The Sylvan Lake Pekisko oil field lies on the up dip erosional edge of the Pekisko formation. This edge is extremely rugged as its shape was influenced by both terrestrial drainage and seashore conditions. Overlying this ancient shoreline are cap rocks (impermeable layers) of the Mississippian Lower Shunda formation and Cretaceous/Jurassic impermeable shales. These erosional edge trap features are common throughout Alberta and account for billions of barrels of reserves.
Originally, geologists mapped section 3-38-3W5M as a ridge of positive structure ("high"). This was done using closely spaced well control, both productive and non productive. This mapping presented the first good positive lead as to the presence of remnant shoreline or a feature resembling what we would imagine as an "island" of preserved Pekisko.
Commonly, the Pekisko reservoir rock along the leading erosional up dip edge of the formation was exposed to sub aerial erosional conditions. These conditions were principally meteoric waters, which percolated downwards through the formation thereby enhancing porosity and permeability by dissolution of portions of the rock and altering the basic limestone composition to a dolomite base rock by the addition of magnesium to the system. These Pekisko features became structural remnants when buried by the overlying Shunda rocks.
As with most coastline features, erosion of the coast leaves several isolated features ("islands" if you will) directly adjacent to the shoreline. These island features are common at Pekisko time and occur immediately offsetting our prospect with the mid 1990's discovery of the Pekisko "N" pool to the south. These islands were eroded and sub aerially exposed under the same conditions as the main leading coastal edge. We interpret our prospect as a "Pekisko island" much the same as the "N" pool. This isolation from the main Pekisko edge preserves virgin reservoir conditions, most notably, original pressure and water saturation. If we are successful in discovering the anticipated isolated Pekisko remnant, we may have room to drill upwards of four or five oil targets in the Pekisko.
Shunda Formation -- This formation overlies the rocks of Pekisko age directly. The Shunda formation was laid down unconformably over the Pekisko in four main depositional pulses commonly referred to as the A, B, C and D units. As with the Pekisko, the Shunda formation in this locale is a shoreline feature with similar erosion and exposure elements, thereby creating similar dolomitic reservoir conditions to the Pekisko. The difference with the Shunda reservoirs is that in this instance, the Shunda was exposed to the shoreline conditions on four separate occasions and if all four reservoirs are preserved all are capable of production. Quite uniquely, the Shunda porosity can occur anywhere in the section, i.e. top, bottom or middle.
Unlike the Pekisko, production from the Shunda reservoirs is commonly natural gas with associated condensate liquids. Minor amounts of Shunda oil occur randomly throughout the Sylvan Lake field area but seem to only occur back about 5 miles from the leading erosional edge of the Shunda. Our prospect occurs directly on the leading edge of the Shunda and accordingly should is natural gas bearing. Production ranges from 2 to over 30 BCF per well in the immediate area. Initial productivity seems to range from 1 mmcf/d to over 5 mmcf/d.
Should we be successful in discovering Shunda gas only one well can be drilled for production in accordance with the Province's production spacing unit for gas. We will also have to pool with the remaining quarter section but on a very minor percentage basis as we can prove that the reservoir does not exist in their well bore.
Geophysical Discussion
To confirm the original geological interpretation of preserved Pekisko and possibly Shunda rocks, a pair of two dimensional seismic lines were purchased in an attempt to pinpoint a possible drilling feature. These two lines did in fact confirm that a feature at Pekisko time did exist.
In the late 1990's a large three dimensional seismic survey was shot (on a speculative basis) all the way down the known leading edge of the Pekisko formation. The purpose of this shoot was to attempt to isolate Pekisko remnant features ("islands"). Our partners purchased a portion of this program and upon interpretation, found a Peksiko and Shunda structural feature existing over the west one half of section 3-38-3W5M. Accordingly, a drilling location has been selected in Lsd. 5 of section 3.
Production Facilities Discussion
This immediate area has been developed for both oil and natural gas over the past forty-five years. Accordingly a multitude of gas gathering and processing facilities and oil transportation facilities have been constructed.
A major gas processing facility is located within two miles of our project with gathering system lines with one half a mile from our proposed drilling location. The capacity of the processing facility is approximately 70 mmcf/d with current throughput of only 46 mmcf/d. Accordingly, excess capacity of 24 mmcf/d exists in the facility which would be in the best interest of the operator to fill as soon as possible.
This gas processing facility also has oil pipeline access for the transportation of raw oil product to the main delivery terminals north of Red Deer, Alberta. Accordingly, trucking costs would be minimal to get oil product to the transportation system.
Paul D. Watson, P. Geol
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Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: Except for historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors effecting the company's operations, markets, products and prices and other factors discussed in the company's various filings with the Securities and Exchange Commission.
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