NAL Oil & Gas Trust
TSX : NAE.UN

NAL Oil & Gas Trust

April 21, 2009 06:00 ET

NAL Oil & Gas Trust Announces a Joint Venture Partnership Agreement Adding to Its Cardium Oil Resource Play

CALGARY, ALBERTA--(Marketwire - April 21, 2009) - NAL Oil & Gas Trust (the "Trust" or "NAL") (TSX:NAE.UN) provides an update on recent corporate activities.

BUILDING ON CARDIUM OIL MOMENTUM IN CENTRAL ALBERTA

Building on recent success in NAL's emerging Cardium oil resource play in central Alberta, NAL is pleased to announce that it has entered into a joint venture agreement with a senior industry partner. The arrangement consists of a three year commitment to spend $50 million (Trust - 65%, Manulife Financial Corp. - 35%) that provides NAL an opportunity to earn in over 150 sections of freehold and crown acreage. The agreement is exclusive to NAL and structured to be extended for up to an additional six years for a potential total commitment of $150 million. This transaction doubles NAL's Cardium acreage position adding land south of NAL's Garrington area.

The Cardium formation will be the primary target, utilizing horizontal drilling and fracture stimulation technology to maximize resource recovery potential. The Viking and Mannville formations also offer multi-zone potential for liquids rich natural gas and light gravity sweet crude oil, adding good option value to this opportunity.

In addition to this partnership agreement, NAL was successful in the March 4, 2009 Alberta Crown land sale, acquiring acreage of approximately ten sections. This land is adjacent to the Trust's most recent successful drilling locations in Sylvan Lake and adds further horizontal drilling prospects to NAL's inventory.

In aggregate, these transactions have increased NAL's horizontal Cardium oil prospect inventory by approximately 50%, to more than 200 potential locations. It is expected that the inventory of drilling prospects will continue to grow as the resource continues to be delineated.

CARDIUM PLAY OVERVIEW

NAL drilled and completed three horizontal wells in the Cardium trend at Garrington in the fourth quarter 2008. These wells are now on stream with three month production profiles that are above economic thresholds using forward strip pricing without considering royalty incentives. These early positive results have validated a follow-on program of 12 horizontal wells with two locations being drilled in the first quarter of 2009. Initial completion results are in line with previous wells and it is expected that this new production will be on stream in early April. The Trust will drill two or three locations related to this new opportunity during 2009.

NAL's current horizontal drilling in the Cardium trend is characterized by:

- Initial production rates after load fluid recovery of 300 - 500 boe/d

- Three month production rates of 100 - 200 boe/d

- Expected six month production rates of 75 - 100 boe/d declining exponentially at 10 - 15%

- Light sweet crude oil (48 degrees API) with no associated water

- Average vertical depth of 2,200 meters with a 1,000 meter horizontal leg

- Between five and eight fracture stimulations per well

- Reserves per well: 150 - 200 MMboe

- Cost per well: $3.5 million average (costs are expected to be lower in the last six months of 2009)

Please click the following link to view the NAL Sylvan Lake Acreage map: http://media3.marketwire.com/docs/421nae.pdf

ALBERTA GOVERNMENT ROYALTY INCENTIVES

The net present value ("NPV") of projects in NAL's central Alberta Cardium oil program, discounted at ten percent, is improved by approximately 30% as a result of the recently announced Alberta Government's stimulus program. This positive impact does not include the drilling royalty credit of $200 per meter drilled, that NAL estimates to equate to approximately $600,000 per well at a 40% credit rate. Due to the high initial production rates, the first year royalty incentives as proposed are meaningful and may lead to incremental capital spending in the latter half of 2009 and in early 2010.

OUTLOOK

"The addition of this acreage consolidates NAL's position in the emerging horizontal Cardium oil resource style play which has been identified, developed and executed by our technical and operating teams," commented NAL's President and CEO, Mr. Andrew Wiswell. "Further, these transactions represent another strategic step toward positioning NAL as a sustainable yield oriented E&P company well beyond 2010."

NAL Oil & Gas Trust provides investors with a yield-oriented opportunity to participate in the Canadian Upstream Conventional Oil and Gas Industry. The Trust generates monthly cash distributions for its Unitholders by pursuing a strategy of acquiring, developing, producing and selling crude oil, natural gas and natural gas liquids from pools in southeastern Saskatchewan, central Alberta, northeastern British Columbia and Lake Erie, Ontario. Trust units trade on the Toronto Stock Exchange under the symbol "NAE.UN".

Contact Information

  • NAL Oil & Gas Trust
    Clayton Paradis
    Manager, Investor Relations
    (403) 294-3620 or Toll Free: 1-888-223-8792
    (403) 515-3407 (FAX)
    Email: investor.relations@nal.ca
    Website: www.nal.ca