Bronco Energy Ltd.

Bronco Energy Ltd.

November 21, 2006 10:42 ET

Bronco Announces Grand Rapids Test Drilling Program

CALGARY, ALBERTA--(CCNMatthews - Nov. 21, 2006) - Bronco Energy Ltd. (TSX VENTURE:BCF) ("Bronco") is pleased to announce that the Bigstone Cree Nation ("BCN") has passed a Band Council Resolution ("BCR") prepared by its legal counsel. The BCR instructs Indian Oil and Gas Canada to issue Petroleum and Natural Gas and Crude Bitumen Oil Sands Leases ("Leases") on 6,500 hectares (5,330 net) of BCN lands on Reserves 166A and 166D ("Lease Lands") to Bronco pursuant to the terms of the April 24, 2006 Joint Venture Agreement with BCN. The Leases will be granted for 5 years on the primary term and will be extended if proven capable of production. Bronco also has an option to lease additional BCN Reserve lands upon the drilling of 7 test wells. The Lease Lands are located at Wabasca, Alberta in the heart of the Athabasca Oil Sands Deposits.

Drilling commitments pursuant to the BCR include the drilling of a minimum 7 vertical test wells in the first year of the Leases plus an additional 4 vertical test wells over a 5 year period. Each test well earns Bronco a 95% working interest in the section of land before project pay out and 75% after project pay out. The BCR also calls for Alberta Crown provincial royalties. For crude bitumen oil sands, the royalties are 1% on gross production before project pay out and 25% net profits interests after pay out.

Bronco anticipates fulfilling its first year 7 well drilling commitment by the end of the first quarter of 2007. Bronco's cost to drill a vertical test well is estimated at $300,000. Bronco has initiated spending on Reserves 166A and 166D. Surveying for the drilling locations has commenced and the environmental assessment is near completion. Eight zones will be evaluated with the test wells and will include Upper and Lower Grand Rapids Oil Sands, Upper, Middle and Lower Wabiskaw Oil Sands, Grosmont Oil Sands, Viking Gas and Clearwater Gas. The primary objective will be to recover core samples from the internally estimated 20 meter average thick Upper Grand Rapids formation. The core samples will be analyzed and tested for response to steam in laboratories. The laboratory results will determine the optimum location for a future Steam Assisted Gravity Drainage ("SAGD") project.

Management of Bronco has internally estimated that the Upper Grand Rapids formation alone contains, as a minimum, original oil in place ("OOIP") of 556 million stock tank barrels ("mmstb") on existing BCN Reserve Lands. The OOIP estimate would be categorized as a "contingent resource" under the Canadian Oil and Gas Evaluation ("COGE") Handbook as the OOIP estimate relates to quantities of oil and gas estimated on a given date to be potentially recoverable from known accumulations. The contingent resources are not currently economic using primary recovery methods, however if technical data from the upcoming test wells supports a SAGD project, then positive economics are anticipated and will be calculated. The COGE Handbook recommends that a probabilistic approach be taken for assigning contingent resources. The following table summarizes Bronco's contingent resources estimates on a low (10% recovery), best (25% recovery) and high (40% recovery) basis (before the deductions of royalties of 1% before pay out and 25% net profits after pay out):

Gross Bronco Net
Contingent Contingent
OOIP Resources Resources
(mmstb) (mmstb) (mmstb)

Low Estimate 556.0 55.6 45.6
(90% Probability)

Best Estimate 556.0 139.0 114.0
(50% Probability)

High Estimate 556.0 222.4 182.4
(10% Probability)

The OOIP estimates are presently classified as "contingent resources" due to technical risk from lack of known data at present. The crude bitumen will not flow and produce without the application of horizontal drilling and steam stimulation. The vertical test wells discussed above need to be drilled and core samples recovered for laboratory analysis. The high-low range of the contingent resources is expected to decrease, and will be confirmed by independent engineers, upon completion of the laboratory analysis. Finally, a pilot SAGD horizontal drilling and production program will be implemented and a portion of the contingent resources may be upgraded to reserves at that time.

Management of Bronco has over 60 years collective experience in heavy oil exploration and production in north east Alberta. The Grand Rapids, a Cretaceous oil sands deposit of 100 million years in age, occurs at a depth of 200 meters at Wabasca, Alberta. The OOIP internal estimate was calculated using volumetric analysis. The pool area and net pay were mapped, and porosity and oil saturation were estimated, using petrophysical logs from existing area wells penetrating the Grand Rapids formation. Existing core samples in the area were also examined to confirm the presence of bitumen and estimated reservoir parameters. The distance to the nearest analogous commercial production is approximately 5 miles.

Mr. Brian Alford, President and CEO, stated, "Bronco is obligated to release this material information as a result of a scheduled BCN general membership meeting later this week. The identification of the prospects on these leases is a direct result of the continued efforts by Bronco's skilled management team and support staff. Vice President of Exploration, Mr. David Work, P. Geol., applied his considerable geological knowledge and experience in the North East region of Alberta to identify this significant Grand Rapids Oil Sands deposit as a prospective SAGD candidate. Chief Operating Officer, Mr. James Esposito's, R.E.T., superior performance has resulted in Bronco's efficient execution of its positive drilling program to date."

Bronco Energy Ltd. trades on the TSX Venture Exchange under the symbol "BCF".

This news release contains forward-looking statements. Forward-looking statements such as the estimates of OOIP, the references to Bronco's exploration program and drilling program and capital expenditures relating to, and timing of, such programs 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 uncertainties inherent in forward-looking information, including factors beyond Bronco's control, and no assurance can be given that the programs will be completed on time, on budget or at all. In addition, there are numerous uncertainties inherent in estimating OOIP, including many factors beyond Bronco's control, and no assurance can be given that the indicated level of OOIP or the recovery thereof will be realized. In general, estimates of OOIP 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. Management's estimates of OOIP are not supported by an independent evaluation report at this time. The OOIP estimate for the lands described in this news release may not reflect the same confidence level as estimates of OOIP for all of Bronco's lands, due to the effects of aggregation. Bronco undertakes no obligation to update forward-looking information 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.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Bronco Energy Ltd.
    Brian Alford
    President and Chief Executive Officer
    (403) 699-8383
    Bronco Energy Ltd.
    David Johnson
    Chief Financial Officer
    (403) 699-8383
    (403) 693-0038 (FAX)