Kreyenhagen Project Area JV Status & Operational Update

Source: 3/25/2013, Location: North America

Solimar Energy 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.

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.

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° API gravity) that has not historically bee n 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.

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Related Categories: Coalbed Methane  General  Heavy Oil  Methane Clathrate  Oil Sands  Oil Shale  Shale Gas  Tight Gas  Tight Oil 

Related Articles: Coalbed Methane  General  Heavy Oil  Methane Clathrate  Oil Sands  Oil Shale  Shale Gas  Tight Gas  Tight Oil 

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