The Property

The Kevin Dome Field has an 88 year history of production from several different zones and depths. Most of the historic production came from the Mississippian Bakken Formation, which in 1922 that has produced over 190 million barrels of oil and 150 billion cubic feet of gas. The Cut Bank Field on the dome’s western edge has produced 190 MMBO and 500 BCFG gas to date.

Geology

The Kevin-Sunburst Dome is located on the Sweetgrass Arch, a regional structural ridge trending north and south, extending from Montana into southern Alberta, Canada, where it continues as the Bow Island Arch. The Sweetgrass Arch was a major tectonic feature of the Alberta Shelf, which occupied north-central Montana, southern Alberta, and western Saskatchewan during the Paleozoic and Mesozoic Time. Marine carbonates and fine clastics were deposited across the region during Paleozoic Time, followed by shelf sands and mud during Mesozoic Time. Throughout Cretaceous Time, near-shore continental and shallow marine clastic sediments were deposited, derived from the developing thrust belt in western Montana.

Numerous sea transgressions and regressions, along with recurrent movement on the Sweetgrass Arch throughout geologic time, have produced major unconformities in the Kevin-Sunburst area. Devonian carbonate strata overlie Cambrian rocks, and Jurassic clastics rest upon Mississippian Carbonates. This active geologic history has created numerous structural and stratigraphic traps across the region. The tremendous stresses related to the uplift of the Kevin-Sunburst Dome have caused now faulting and fracturing, and reactivated old faults and lineaments. The huge dome has provided a focus for oil migration and accumulation, contributing to the oil and gas permeation of the Nisku porosity zone.

Devonian Nisku Potential

The Nisku Formation appears to be oil and gas saturated beneath the Americana leasehold and throughout the entire closure of the dome. The formation is about 3,000 feet deep and is 60 and 70 feet thick. Porosity has developed within a 20-ft zone about 25 to 30 feet below the top of the formation. It is this porosity zone that accounts for the commercial Nisku wells, wherever five percent (5%) or greater porosity has been encountered. Although few wells on the Kevin-Sunburst Dome have penetrated the Nisku Formation, several oil fields were discovered during the 1980’s. One of these, the East Kevin Field, has produced nearly 1 MMBO to date and over 4 BCFG, including 2 BCFG from a single well.

The Nisku Formation was deposited as a shallowing-upward conbonate-evaporate sequence grading from open marine wachestones into supratidal laminated dolomites and anhydrites. Primary porosity in the Nisku Formation is a dolomitized skeletal grainstone that developed in a beach or winnowed island environment. Island shoeals and beaches probably formed in response to the emergence of peleotopographic features along the ancestral Sweetgrass Arch. Old faults and fractures were likely reactivated during the Laramide-Age domal uplift. 3D seismic surveys are valuable for delineating paleostructures and faults where there could be enhanced Nisku porosity.

At the East Kevin Field, the reservoir zone is 5 to 15 feet thick, with 5 to 15 percent porosity. Seismic amplitude anomalies show a correlation with Nisku porosity and production, so seismic may be useful for extrapolating porosity trends. Also, new horizontal drilling technology, similar to that being applied to the Bakken Formation in eastern Montana and North Dakota, could boost Nisku oil production by connecting more of this variable porosity reservoir zone. The acquisition of the Americana leasehold affords a significant opportunity to Nisku reservoir development, with both vertical and horizontal wells, and includes prospects already defined by 3D seismic data.

Seismic Data

On the Kevin-Sunburst Dome, only one Nisku well was drilled using seismic data and the well was abandoned due to mechanical problems. Numerous seismically-defined prospects remain untested. Management believes that 3D seismic will reduce the risks of finding oil in the Nisku Formation. The 3D program already acquired by the current owner has delineated faults, flexures, and closures, as well as Devonian paleostructures. Paleostructures and seismic amplitude anomalies correlate with porosity in the Nisku Formation. The leasehold in this transaction is large and affords abundant opportunities for low-cost vertical wells, and horizontal drilling guided by seismic. Furthermore, the sizeable blocks of contiguous leases in this transaction facilitate the permitting and acquisition of large 3D seismic surveys.

Production and Economics

The Nisku oil is sweet, ranging from 35 to 39 degrees API Gravity. Several East Kevin Field wells have exceeded 75,000 BO each, with no water production. The expectation of 50,000+ BO at only 3,000 feet makes the Nisku Formation an exciting and very profitable for vertical wells. Modern horizontal drilling techniques could be expected to increase production. In the past, four horizontal wells were drilled in the East Kevin Field but the 3D seismic shows that the wells were NOT kept in the porosity zone. It is predicted that horizontal wells steered by 3D seismic will be more successful than previous attempts.

A 75,000-acre leasehold could provide considerably more than 100, 80-acre drill sites (this amounts to only 8,000 acres). It is reasonable to expect that new reserves could exceed 5 MMBO. Having wide-spread oil saturation and a lack of water, the Nisku zone is similar to other resource plays. Management believes that on-going horizontal drilling over the next 5 to 6 years may prove to be the optimum tool and strategy to exploit the variable porosity in the Nisku Formation.

The efficiencies created include the ability to develop a large acreage position surrounded by currently producing wells as well as the multiple under-developed oil pays in the area (8 formations and 13 zones). The flat terrain throughout the acreage facilitates seismic acquisition and lower cost drill sites. Additionally, there are pipelines in proximity to the lease allowing for ease of marketing and sale of production. The ability to drill shallow wells lowers the drilling costs and further enhances the economic viability of the project. These factors were major considerations undertaken by management during the due diligence of the Kevin Dome.