CALGARY, June 22 /CNW/ - GEOCAN Energy Inc. ("GEOCAN" or the "Company")
(TSX: GCA) wishes to announce a reduction to the freehold royalty rates for
its 100% working interest Lloydminster enhanced oil recovery ("EOR") project
to 4.0% before payout, 6.0% after payout from an existing 15%. This reduction
applies only to the commercialization of a steam assisted gravity drainage
("SAGD") scheme within the Waseca formation on the project lands.
"We are pleased to have been able to put in place a royalty structure
that recognizes both the capital required and rates of return required to
initiate a project of this size. Both the Alberta and Saskatchewan governments
have royalty relief strategies in place to assist in the development of EOR
projects and this is similar in nature. With this negotiation behind us, we
can now move forward with the project funding phases" stated Wayne Wadley
President and CEO.
The reduction to the royalty is a major step toward full scale
development of these Lloydminster area heavy oil EOR reserves. The Company
first disclosed the EOR project publicly in its yearend press release issued
March 30, 2007. Independent third-party engineers DeGolyer and MacNaughton
Canada Limited have estimated this new pool discovery to have 24.8 million
barrels of probable recoverable reserves using a SAGD strategy. The pool,
which was delineated with five vertical wells in 2006, is concentrated in less
than one section of land, making development relatively straightforward. The
reservoir is also 3D seismically defined. It is located in an area well served
by sales pipelines and other infrastructure.
It is anticipated that a pilot phase will be initiated to validate the
geologic model and streamline any technical issues before proceeding to a
full-scale enhanced recovery scheme. This pilot project would include two to
three horizontal well pairs with surface facilities to handle the associated
production volumes. This phase is expected to cost approximately $40 million.
Preliminary estimates identify potential for up to 15 well pairs to fully
develop the reserves in place. The full phase development cost incremental to
the pilot phase is anticipated to be $160 million.
Advisory -- Forward-looking Information
This press release may include certain forward-looking statements. These
statements involve known and unknown risks, uncertainties, and other factors
that may cause actual results or events to differ materially from those
anticipated in the forward-looking statements. However, while management
believes these forward-looking statements to be reasonable, the reader cannot
be assured that these expectations will prove to be correct. The reader should
not unduly rely on these forward-looking statements as these statements speak
only as of the date hereof. Additional information about the company can be
found on www.sedar.com.
Barrel of oil equivalent (BOE) may be misleading, particularly if used in
isolation. A BOE conversion ratio for natural gas of 1 bbl : 6 mcf. This is
based on an energy equivalency conversion method particularly applicable at
the burner tip and does not represent a value equivalency at the wellhead.
For further information:
For further information: Wayne Wadley, President and CEO or Brad Farris,
VP Finance and CFO, GEOCAN Energy Inc., Phone (403) 261-3851, Fax (403)
261-3834, Email firstname.lastname@example.org or email@example.com, Website: