/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE
TSX Trading Symbol: UTS
CALGARY, Dec. 3 /CNW/ - UTS Energy Corporation ("UTS") is pleased to
announce the results from the 2006/2007 drilling program completed on the
1. Lease 14;
2. Leases 311, 468, 470 and 477 (the "Lease 311 Area"); and
3. The southern boundary of Lease 840.
Lease 14, which is owned 50 per cent by UTS and 50 per cent by Teck
Cominco Limited ("Teck Cominco"), comprises 7,147 acres on the west side of
the Athabasca River, directly across the river from the northern boundary of
the Fort Hills Oil Sands Project and bisects oil sands leases associated with
the proposed Pierre River Mine operated by Shell Canada.
In 2006 Norwest Corporation ("Norwest"), an independent geological and
engineering consulting company, derived Low, Best and High estimates of 51,
190 and 493 million barrels of bitumen in place using the 28 core holes
drilled in early 2006. These estimates were classified as Discovered Resources
using standard mining criteria and a Total Volume:Bitumen in Place ("TV:BIP")
cutoff of 16:1. Further, Norwest developed mining pit shells on Lease 14 based
on the presumption of ore continuity between the wells. Based on Norwest's pit
shell analysis, UTS Management's previously disclosed estimate of recoverable
bitumen was 400 million barrels using a TV:BIP cutoff of 16:1.
The 2007 drilling program included a further 96 core holes on Lease 14
for a total of 124 core holes on Lease 14, or 16 holes per section, over the
mineable area. This drilling density is now sufficient to provide a contingent
resource estimate which is currently being completed by an independent
evaluator and is expected in the first quarter of 2008.
Norwest was also engaged by UTS and Teck Cominco to provide an estimate
of recoverable bitumen on Lease 14 at a TV:BIP cutoff of 16:1 incorporating
all of the relevant data, including the results of the 2007 drilling program.
This estimate by Norwest now fixes the transaction volume at 400 million
barrels for the UTS disposition of a 50 per cent working interest in Lease 14
to Teck Cominco at $200 million, based on a price of $1 per barrel of bitumen.
Lease 311 Area
The Lease 311 Area, which is owned 50 per cent by UTS and 50 per cent by
Teck Cominco, comprises approximately 26,880 acres on the west side of the
Athabasca River, approximately 10 kilometres north of Lease 14.
The 2007 drilling program encountered potentially mineable oil sands in
48 wells over an area covering approximately 23 sections based on
approximately two core holes per section. Oil sands thicknesses range from
approximately 15 metres to 45 metres with overburden thicknesses generally
varying from 10 metres to 60 metres.
UTS retained Norwest to provide a preliminary assessment of the Lease 311
Area based on the results of the wells drilled. Norwest's estimates of
Discovered Resources of bitumen based on the drilling density of two wells per
section and a TV:BIP of 16:1 resulted in a Low Estimate of 279 million
barrels; Best Estimate of 1,051 million barrels; and High Estimate of
2,791 million barrels. Norwest was also requested to develop a mineable pit
shell on the assumption of continuity of oil sands between the core holes
drilled and the same standard oil sands mining criteria as used in the Lease
14 analysis. UTS' Management has analyzed the results to date and believes
that, based on the data and Norwest's pit shell analysis, the recoverable
bitumen contained within the pit shell, effective December 3, 2007, is:
1.8 billion barrels using a cut-off of 12:1 TV:BIP, and
2.3 billion barrels using a cut-off of 16:1 TV:BIP.
Discovered Resources are defined as "those quantities of oil and gas
estimated on a given date to be remaining in, plus those quantities already
produced from, known accumulations. Discovered Resources are divided into
economic and uneconomic categories, with the estimated future recoverable
portion classified as reserves and contingent resources respectively". A more
specific classification of these Discovered Resources can not be made at this
time due to insufficient core hole data.
The significant positive factor is that 61 out of 63 core holes
encountered oil sands indicating high prospectivity throughout the Lease 311
Area. The uncertainties relate to a drilling density requirement of
approximately 16 wells per section to establish a high degree of certainty for
a contingent resource classification. There is no certainty that it will be
commercially viable to produce any portion of the resources.
UTS' Management believes that 16:1 TV:BIP is an appropriate cut-off to
use for determining economic pit limits in the current oil price and operating
cost environment and was the threshold employed in the Lease 14 transaction
with Teck Cominco.
UTS and Teck Cominco now intend to complete an extensive core hole
drilling program this upcoming winter, which will result in a drilling density
sufficient to provide a contingent resource estimate by the end of 2008. We
expect the drilling program to commence in January 2008 and to be completed by
March 2008, subject to receiving appropriate regulatory approvals.
Lease 840, which is owned 50 per cent by UTS and 50 per cent by Teck
Cominco, comprises approximately 23,040 acres on the west side of the
Athabasca River, approximately six kilometres north of the northern boundary
of the Lease 311 Area (26,880 acres). Lease 840 is part of a further
contiguous block of land amounting to 84,480 acres, and comprising of Leases
610, 840, 513 and 514, resulting in a total block of land with a potentially
mineable portion of approximately 76,800 acres (120 sections).
In the 2006/2007 winter season, UTS and Teck Cominco drilled 10 core
holes near the southern boundary of Lease 840. Based on results of the core
analysis, six core holes encountered oil sands and three of these encountered
potentially mineable oil sands, with thicknesses ranging from 15 metres to
30 metres and overburden thicknesses varying between approximately 30 metres
and 50 metres. With these positive results from the preliminary exploration
program, UTS and Teck Cominco intend to drill a further 65 core holes in the
upcoming drilling season to further evaluate Lease 840 and adjacent leases.
"We believe we have a significant discovery on the west of the Athabasca
River," said Will Roach, President and Chief Executive Officer. "Lease 14 is
really a good news story on two fronts. Firstly, in terms of process, in that
last year when we had a lower drilling density on Lease 14 we were able to
quite accurately estimate the mineable resource contained on the Lease.
Secondly, in terms of the actual drilling results, we have confirmed our
belief that we have in the order of 400 million barrels of bitumen on the
Lease." Dr. Roach went on to comment "the Lease 311 Area results, covering
about 34 sections, are even more encouraging and we believe, by analogy to the
Lease 14 experience and based on a similar pit shell analysis, this Lease 311
Area could contain a mineable volume in the range of 2.0 to 2.8 billion
barrels. Moreover, the contiguous and demonstrably prospective 60 sections
directly north of the Lease 311 Area, which we plan to explore this winter,
gives us a firm belief that we have discovered a significant mineable
resource. We are of the view that this, plus our well funded 20 per cent
working interest in the Fort Hills Project, will serve as a great platform for
the growth of UTS over the next decade."
There are a number of potential development options for the production of
bitumen from each of Lease 14, the Lease 311 Area and Lease 840. At present,
no decisions have been made regarding quality specifications, marketing and
transportation arrangements, or joint development with other area operators.
For additional information please refer to UTS' Annual Information Form
including the risk factors stated therein, filed on SEDAR and available at
www.sedar.ca or www.uts.ca.
UTS Energy Corporation, with a market cap of approximately $2.6 billion,
was instrumental in re-establishing the Fort Hills Oil Sands Project and is
the principal founder of the Fort Hills Energy Partnership.
The Company has two strategic areas of focus. Firstly, the development
and execution of the Fort Hills Project. UTS owns a 20 per cent working
interest with partners, Petro-Canada with a 60 per cent working interest and
Operator, and Teck Cominco with a 20 per cent working interest. Secondly, the
Company is focused on the exploration and development of oil sands leases held
jointly by UTS and Teck Cominco. These lands consisting of potentially
mineable and in situ resources, if prospective, provide organic growth
opportunities and potentially future funding flexibility for UTS.
UTS Energy Corporation is based in Calgary, Alberta. The Company's common
shares (UTS) are traded on the Toronto Stock Exchange.
FORWARD-LOOKING STATEMENTS: Except for statements of historical fact
relating to the Company, this news release contains certain "forward-looking
statements" within the meaning of applicable securities law. Forward-looking
statements are frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate" and other similar
words, or statements that certain events or conditions "may" or "will" occur.
Forward-looking statements such as the references to the Company's anticipated
core hole drilling program, capital expenditures and estimates of resource
volumes are based on the opinions and estimates of Management at the date the
statements are made, and are subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ
materially from those anticipated in the forward-looking statements. There are
numerous uncertainties inherent in estimating resource volumes, including many
factors beyond the Company's control, and no assurance can be given that the
indicated level of resource volume or the recovery thereof will be realized.
In general, estimates of resource volumes are based upon a number of factors
and assumptions made as of the date on which the resource estimates were
determined, such as geological and engineering estimates which have inherent
uncertainties. The estimates of resource volumes are the opinion of UTS'
Management and are not supported by an independent evaluation report at this
time. The Company undertakes no obligation to update forward-looking
statements if circumstances or Management's estimates or opinions should
change except as required by law. The reader is cautioned not to place undue
reliance on forward looking statements.
For further information:
For further information: Dr. William J. F. Roach, President and Chief
Executive Officer, or Wayne I. Bobye, Vice President and Chief Financial
Officer at (403) 538-7030