Enhanced Oil Resources Inc. Provides 2011 Activity Update

HOUSTON, TX, Jan. 19 /CNW/ - Enhanced Oil Resources Inc. (TSX-V: EOR) is pleased to provide the following update regarding the Company's proposed activity for 2011.

The Company had previously announced on December 22nd 2010 that it had completed a $25 Million bank credit facility with Regions Bank.  The credit facility capped a year where the Company produced four straight quarters of positive cash flow, increased daily oil production during the year from 369 bopd (average for 4th quarter 2009) to 488 bopd (average for 4th quarter 2010), increased proven oil reserve values from $30 Million to over $60 million dollars and announced a gas purchase contract with Kinder Morgan CO2 Company, L.P. In the St. Johns helium/ CO2 field in Apache County, Arizona the Company also completed three additional obligation wells and received conditional approval from the Arizona State Land Department to extend, by twelve months, the remaining two commitment wells at the St Johns Helium/ CO2 Unit. Parallel to the drilling in St Johns, Greenfire Energy announced they had received a $2 million grant from the Department of Energy (DOE) for field testing of potential geothermal energy at the St Johns Dome.  Greenfire Energy was introduced as a potential joint venture partner in the St Johns dome and would focus on testing the potential for developing geothermal energy using CO2 from the St Johns field.

With the developments of 2010 behind us, the Company's focus for 2011 is the accelerated development of the Company's oil reserves at the Milnesand, Chaveroo and Crossroads oilfields. Specifically, during 2011 the Company will focus on: 

  1. Initiating the Milnesand oil field 20 acre infill drilling program in New Mexico.
  2. Accelerate well reactivations and workovers  at both Milnesand and Chaveroo oilfields.
  3. Exploration and exploitation of behind pipe zones in existing wells in Crossroads.
  4. Completion of pipeline right of way for the Company's proposed 40 mile pipeline from Kinder Morgan CO2 Company LP's Cortez pipeline to the Company's Milnesand and Chaveroo oil fields.
  5. Preparation for the potential delivery of CO2 to Milnesand.
  6. Continued evaluation of a helium project in our St Johns field.
  7. Continued evaluation of a geothermal project in our St Johns field.
  8. Market and industry exposure of Enhanced Oil Resources.

Oilfield Operations

The key focus for the Company in 2011 is to initiate and evaluate the potential for 20 acre infill drilling at the Milnesand San Andres field in Roosevelt County, New Mexico. As previously reported, independent engineering studies have concluded that considerable remaining reserves could be exploited at Milnesand through the development and infill drilling of up to seventy, 20 acre locations. It is the Company's plan to initiate that program as soon as possible. In late 2010, the Company met and discussed the upcoming drilling plan with the various federal and state regulatory bodies who will be involved in authorizing any drilling program in New Mexico.  Included in these discussions was the need for an accelerated work program that would reactivate, remediate and plug certain peripheral wells within both the Milnesand and Chaveroo fields. The Company has prepared a plan for 2011 that will, at a minimum, investigate the potential to add additional reserves and production from existing wells and from new wells. Over 40 wells have been identified for workover activity at Milnesand, Chaveroo and Crossroads with the bulk of this activity being conducted within the first 6 months of 2011. At Milnesand we have begun the process of identifying existing wells that can be sidetracked at high angle into the San Andres or drilled as horizontal wells to access potential bypassed pay zones not accessed by the original, 40 acre, vertical wells. Longer term, we anticipate drilling additional vertical infill wells once the development plan and environmental approvals have been granted.

Cortez to Milnesand Pipeline

In April 2010, the Company announced a CO2 gas purchase contract with Kinder Morgan CO2 Company, L.P.The Contract stipulates Kinder Morgan CO2 Company, L.P.will sell CO2 to Enhanced Oil Resources on a take or pay basis starting in September, 2012.  In preparation for the Company taking the gas, a pipeline spur is being planned and constructed for the transportation of CO2 from Kinder Morgan's Cortez pipeline to our Milnesand and Chaveroo fields.  Investigation and consultation of the pipeline spur began in June of 2010 and has reached a point where the design has been completed and the path to be used has been identified.  The pipeline, anticipated to be 8 inches in diameter and 41 miles long, requires approximately 6 months for construction.  The Company has started purchasing the rights of way and is beginning to prepare the State and Federal permitting required for the commencement of construction.  The balance of 2011 will be focused on regulatory requirements with any construction not being considered until the next calendar year. A formal investment decision will be discussed at the board level within the next few weeks.

St Johns Helium

Enhanced Oil Resources continues to explore ways to exploit and/or monetize the St Johns Helium/ CO2 asset.  In 2010 we completed 3 wells, each located in the high helium, northern end of the field. All 3 wells were successfully drilled into the Amos Wash productive interval and were flow tested for 24 hours at restricted rates of 500,000 cubic feet per day (cfpd) to 900,000 cfpd. Helium content ranged from 0.72% to 0.9%, consistent with other helium production obtained in this area of the field. The Company is currently reviewing the potential for a liquid Helium plant with initial capacity of 100,000,000 cfpd of raw feedstock gas. Final plant design is being completed and final costs should be available within 3 months. Any development of a Helium plant requires intensive permitting and capital and a timeline of approximately 2 to 3 years.  With that in mind, the Company will explore the initiative and expects to have a plan in place by the end of the second quarter of this year.  Any plan would then be conditional on obtaining the required permits and financing to move forward.

St Johns Geothermal

The Company had previously announced a relationship and potential JV partnership with Greenfire Energy Ltd for the purpose of investigating and potentially developing a geothermal energy program using CO2 from the St Johns field.  Any potential investigation of a program would require many steps be taken, with one of the most important being Greenfire Energy obtaining federal grant funding.  Greenfire announced in the fourth quarter of 2010 they had received confirmation of $2 million in federal funding focused on investigating geothermal energy by using CO2.  Greenfire Energy is now in discussions with the federal agencies regarding their plan and how the funding will be utilised.   Upon the conclusion of their talks with federal agencies, Greenfire and EOR will finalise their plan and agreement.  Both companies are hopeful a plan and project can be initialized in the 3rd quarter of this year.  As previously announced, test wells could be drilled to depths approaching 10,000 feet below the surface and would be used to test temperatures and other variables critical to the use of CO2 in the production of geothermal energy.  Any test of the wells would be expected to last for up to 2 years before any conclusion can be made.

Market and Industry Exposure

Enhanced Oil Resources is a company with positive cash flow, proven oil reserves, financing in hand and a business plan that lays out a path for systematically improving daily oil production.   Key to increasing oil production is the initiation of infill drilling at Milnesand either through sidetracking of existing wells or by new 20 acre vertical infill wells. The results from the initial infill program will go a long way to increasing investor awareness and shareholder value.  The confirmation that additional reserves and production can be achieved through this infill program will result in a de-risking of the project and potentially, by analogy, add significant additional reserve potential at Chaveroo where over 180 infill wells could be added. With efforts designed to bring production to 1000 barrels of oil per day and beyond, we believe the Company is poised to garner new interest from market investors and potential partners alike.  The production is expected to increase with each infill well and potentially increase further once CO2 injection starts.  While the Company is receiving some industry exposure, we have set out a plan to increase market awareness by participating in road shows and conferences beginning in February at the IPAA conference in Florida and shortly followed thereafter by the NAPE conference in Houston. Additional conferences are planned and these will be announced in the near term. 

The Company's President and CEO Mr. Barry Lasker states "With the latest bank financing now in place we can now begin to build on the foundation that was laid down during 2010. We have several exciting projects in place for 2011 and with continued positive results we believe 2011 will be an exciting time as our company moves towards higher daily oil production and cash flows.  Parallel to our oil projects we will continue the investigation of our helium and geothermal projects.  As always, we thank the shareholders for their support and we look forward to providing additional updates as they occur."

Forward-Looking Statement

Certain statements contained herein are forward-looking statements, including statements relating to Enhanced Oil Resources' operations; business prospects, expansion plans and strategies.  Forward-looking information typically contains statements with words such as "intends," "anticipate," "estimate," "expect," "potential," "could," "plan" or similar words suggesting future outcomes.  Readers are cautioned not to place undue reliance on forward-looking information because it is possible that expectations, predictions, forecasts, projections and other forms of forward-looking information will not be achieved by Enhanced Oil Resources.  By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties.  A change in any one of these factors could cause actual events or results to differ materially from those projected in the forward-looking information.  Although Enhanced Oil Resources believes that the expectations reflected in such forward-looking statements are reasonable, Enhanced Oil Resources can give no assurance that such expectations will prove to be correct.  Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Enhanced Oil Resources and described in the forward-looking statements or information. The forward-looking statements are based on a number of assumptions which may prove to be incorrect.  Readers should be aware that the list of factors, risks and uncertainties set forth above are not exhaustive. Readers should refer to Enhanced Oil Resources' current filings, which are available at www.sedar.com, for a detailed discussion of these factors, risks and uncertainties.  The forward-looking statements or information contained in this news release are made as of the date hereof and Enhanced Oil Resources undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable laws or regulatory policies.

ON BEHALF OF THE BOARD OF DIRECTORS

(signed)

Barry D Lasker, CEO

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. 

SOURCE Enhanced Oil Resources Inc.

For further information:

visit our Website at www.enhancedoilres.com.or please call Don Currie on 1-888-990-3551

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Enhanced Oil Resources Inc.

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