Birch Lake Energy Inc.
TSX VENTURE : BLK

August 25, 2011 11:21 ET

Birch Lake Energy Provides Operations Update and Announces First Production

CALGARY, ALBERTA--(Marketwire - Aug. 25, 2011) - Birch Lake Energy Inc. ("Birch Lake" or the "Corporation") (TSX VENTURE:BLK) is pleased to announce first production from its non-core heavy oil property in Edam, Saskatchewan, and to provide an update on activities in the Corporation's core areas in Alberta.

Under a farmout of the Edam lands, the well 112/ 8-18-48-20 W3 was recently drilled, completed and put on production early August, 2011. The Corporation has a 40% working interest in the well which is currently producing 23 bopd (gross), 9 bopd (net), and is still in the build phase of production. The farmee has an option to drill a further farm-in well on the Edam lands following evaluation of this well. Birch Lake views this asset as non- core and is pleased to have the property brought into production at no cost to the Corporation.

LOCHEND- Horizontal Cardium Light Oil Play, Alberta

The operator of the Lochend property, a private company, plans to license the first well of a proposed Cardium horizontal drilling program on the property by the end of September. Licensing has been delayed to allow the operator to address certain stakeholder concerns regarding the proposed drilling program. The first well will evaluate the Cardium A as encountered in the 11-03-25-3W5 well, drilled in 1954, where wire-line logs indicate an oil-saturated Cardium A zone, and a potentially bypassed oil pay zone in the slightly deeper conventional Cardium B sand. The Cardium A sand at the 11-3 location is analogous to the Cardium A several miles north along trend where Alberta Crown land sales have attracted bonuses of more than $1.0 million (1) per section and initial rates in excess of 1,000 boepd(2) have been achieved using horizontal drilling and multi-stage fracturing techniques. Birch Lake holds a non-operated 40% working interest in the lands to be evaluated by the first well, and an average 35.6% working interest in a total of approximately 8,800 gross acres (13.25 sections) in the Lochend-Cochrane area, west of Calgary, Alberta. Under current production drilling spacing practices, potential exists for up to 56 gross wells (20 net) on the Corporation's lands.

HALKIRK- Horizontal Viking Light Oil Play, Alberta

Recent Alberta Crown land sale results and offsetting drilling activity have further de-risked and enhanced the value of Birch Lake's lands in the Halkirk area. Recent horizontal drilling as near as 200 metres from the Corporation's lands, was followed by an Alberta Crown land sale on August 10, 2011 which attracted an average of $1.5 million per section for adjacent petroleum and natural gas rights. This is a record bonus for P&NG rights in this area, and represents an approximate 350% premium to the Corporation's acquisition costs. Production information on these new wells, including initial rates, is not known at this time but is expected to be in the public domain within 60 days of first production. The Corporation has no immediate drilling requirement on the lands and is pleased to see such robust industry activity in the immediate area. This activity will be closely monitored and the results will be invaluable in planning and scheduling the evaluation of the Corporation's lands on this prospect. A first well is planned for first half of 2012, following initial evaluation of the Corporation's Lochend property. Birch Lake holds a net 93.2% operated working interest in 3,520 acres (5.25 sections) in the Halkirk area. Under currently prescribed production drilling spacing units, potential exists for more than 20 net drilling locations.

The Corporation believes current industry activity in both its Lochend and Halkirk core areas further supports the "core asset value" of $0.26 per share as set forth in the Corporation's press release of June 7, 2011. For additional information, interested parties are invited to visit www.BirchLakeEnergy.com.

(1) Alberta Energy March 10, 2010, Crown sale results

(2)Source: Sayer Energy Advisors marketing mailer, March 3, 2011. Birch Lake is unable to confirm that the production information reported by Sayer was prepared by a qualified reserves evaluator or auditor or in accordance with the COGE Handbook. The Sayer report was prepared independent of Birch Lake and the Cardium zones mentioned in the report are proximate to the Birch Lake Cardium targets.

About Birch Lake Energy Inc.

Birch Lake is a junior oil and gas company engaged in the exploration for and the acquisition, development and production of oil and natural gas reserves. The Corporation's common shares are listed to trade on the TSX Venture Exchange under the symbol "BLK".

Forward Looking and Cautionary Statements:

This press release contains certain statements which constitute forward-looking statements or information ("forward-looking statements"), including statements regarding Birch Lake's business, such as the review of strategic alternatives and establishing a portfolio base and developing a new web-site which by their nature are forward-looking statements and which are subject to numerous risks and uncertainties, some of which are beyond Birch Lake's control, including the impact of general economic conditions, industry 2 conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, operational risks in exploration and development, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the ability to access sufficient capital from internal and external sources. Although Birch Lake believes that the expectations in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Birch Lake does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boebasis, such measurements may not be consistent with those used by other companies.

Neither the 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.

Contact Information

  • Birch Lake Energy Inc.
    William H. Petrie
    President and Chief Executive Officer
    (403) 457-1944
    www.BirchLakeEnergy.com