|
The
early focus of the Company's drilling program is to
define the heavy oil reservoir one section at a time and
attempt to initiate production from each drilled
location as soon as is practical in order to generate an
early positive cash flow.
Deep Well, through our
subsidiaries Northern Alberta Oil Ltd. ("Northern")
and Deep Well Oil & Gas (Alberta) Ltd., currently
has an 80% working interest in 56 contiguous
sections of oil sands leases and a 40% working interest
in an additional 12 contiguous sections of oil sands
leasees in the Peace River oil sands area of Alberta,
Canada. Our oil sands leases cover 43, 015 gross
acres (17,408 gross hectares) of land.
Operations
Activity
Previously,
we successfully completed a drilling program and
drilled 6 vertical wells. In addition, we have an
interest in 3 horizontal wells, which were previously
drilled by our former farmout partner, and an interest
in two wells that we acquired. Since then we have
been evaluating the options for production available
to us to determine the best course of action.Drilling
on 80% of owned lands has opened new avenues
for testing and further development of the Sawn Lake
project. The focus of our drilling program is to
define the heavy oil reservoir to establish reserves
and to determine the best technology under which
oil can be produced from the Sawn Lake project in
order to initiate production and generate cash flow.
In September 2009, we submitted
an application to the Energy Resources Conservation
Board ("ERCB") for a commercial bitumen recovery scheme
to evaluate the 12-14-092-13W5 well for potential development
using Cyclic Steam Stimulation ("CSS") and later added
the 6-22-092-13W5 well to the application. On October
14, 2010, this application was approved by the ERCB
to conduct one CSS production test on one of the wells
to evaluate the oil sands resource using this secondary
recovery technology. The CSS process involves steam
injection into a well for a period of up to 30 days,
potentially a "soaking" period, followed by production
of heavy oil for up to 50 days or more. This CSS production
test is not only for the production of heavy oil from
the Bluesky zone of the Sawn Lake project but it will
also aid in quantifying our oil reserves.
In July 2010, Chapman Petroleum
Engineering Ltd. performed an independent technical
evaluation of the heavy oil properties on some of our
Sawn Lake properties. The report confirmed the suitability
for thermal recovery methods. In addition, Chapman
Petroleum Engineering Ltd. identified a new hydrocarbon
bearing zone up-hole from the Bluesky zone presently
being concentrated on by our Company. This secondary
heavy oil zone is in the Peace River formation. It
is a clastic unit of lower cretaceous age found at
a shallower depth than the Bluesky zone. It is approximately
35 meters thick and is a massive very fine to medium
grain sandstone conformably deposited on the Harmon
Shale. We will continue the development of the Buesky
reservoir and at the same time we will evaluate this
newly discovered reservoir by coring furture wells
within this zone.
On November 9, 2010, we
secured two private placement financings for $2,050,000.
We intend to use the majority of the net proceeds from
these private placements to conduct engineering, construction
and other operations for its recently approved CSS
production test.
We
have engaged environmental consultants to proceed
immediately with the environmental studies mandated
by Alberta Regulations before we can embark on a
five to seven well production pilot project as an
interim step toward full scale commercial production.
Our geological studies lead us to conclude that our
working interest can support full commercial production.
We are fully committed to best practices in environmental
stewardship to assure sustainable development of
our in-situ heavy oil holdings.
|
