Cloudbreak Resources Ltd.

Cloudbreak Resources Ltd.

November 19, 2010 09:15 ET

Cloudbreak Expands Oil Lease Holdings/Prepares for Drilling

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 19, 2010) - Cloudbreak Resources Ltd. (the "Company") (TSX VENTURE:CDB)(FRANKFURT:C6K) has entered into a purchase agreement with two arm's length vendors to acquire a 100% interest in three 5 year oil and gas leases covering approximately 1,120 acres (1.75 sections) of land in southeast Saskatchewan. The subject properties are undeveloped, but are located adjacent to existing light oil production and in close proximity to existing infrastructure.

The consideration for the acquisition will be $272.63 per acre, payable in cash. The Company will acquire a 100% interest in all three leases subject to a sliding scale royalty on production starting at 17% of production and being reduced by 1% for each 1% by which the aggregate of all government royalties applicable to production under a particular lease exceed 5%, down to a minimum royalty in favor of the vendors of 10%. To facilitate payback of drilling costs, the royalty will not apply to the first 30,000 bbl of oil equivalent production from the first horizontal well or 20,000 bbl of oil equivalent production from the first vertical well drilled on each property to the Red River formation within four years after closing. An AMI of 3 km from the outer lease boundary of each property will be in effect. If any land is acquired within any such AMI, it will form part of the property subject to the AMI, and be subject to the same royalty.

The three properties, to be known as Parcels J11, J12 and J13, are located on a productive trend within a structural belt that is parallel to the prolific Minton Red River oil field. Parcel J11 is located directly on top of an interpreted basement structural high, and J12 is located on the northeast side of a basement structural high. All three parcels are in close proximity to excellent Red River production.

Parcel J11 is only 220 m from an active Red River oil well with strong cumulative production of almost 240,000 bbl. Parcel J12 is only 160 m from another current Red River producer that has returned over 96,000 bbl to date. Parcel J13 is 560 m from a Red River oil well with cumulative production of over 55,000 bbl. Further to the north of J13 is a prolific Red River oil well that has yielded over 317,000 bbl, with a daily average of 567 bpd over the first 12 months.

The Red River is a porous dolomite that typically produces oil at high flow rates and exceptional volumes from dome-like traps where the formation is draped over local basement highs. These three acquisitions have provided the Company with a prime opportunity to gain exposure to the prolific Red River play in the Minton area. They augment the Company's J6 Red River prospect that was documented in its July 15, 2010 news release. 

Dr. Hairuo Qing, Advisor to Cloudbreak's Board of Directors, states: "Based on the location of these parcels relative to mapped basement highs in the area, and their close proximity to strong Red River production, these acquisitions provide the Company a rare opportunity to acquire additional key lands with excellent Red River potential, and increase its exposure to this highly desirable light oil play".

As part of the Company's aggressive growth strategy, it plans to retain Chapman Petroleum Engineering Ltd. to assess the NI 51-101 resource potential of these parcels and complete detailed reviews of all its lands in final preparation for drilling.


Peter Bryant, President & Director

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.

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