Oil Reserve Inc.

Oil Reserve Inc.

October 10, 2012 09:00 ET

Oil Reserve Inc. - Corporate Update

CALGARY, ALBERTA--(Marketwire - Oct. 10, 2012) - Oil Reserve Inc. ("Oil Reserve" or the "Corporation") is pleased to provide an update to shareholders and the investment community as set forth below. Oil Reserve is active in the Athabasca and Peace River areas of northern Alberta's "Carbonate Triangle", where it is focused on defining economically viable heavy oil resources on 37 oil sands leases. Oil Reserve holds a 100% working interest in 587,520 acres (25.5 townships) of Crown lands.

Management is encouraged by the potential of the lands. A number of other companies are presently operating in the areas of interest including Laricina Energy, OSUM Oil Sands, Shell Canada. Tamm Oil and Strata Oil and Gas. The Carbonate Triangle represents a large bitumen and heavy oil hearing area that is estimated to contain as much as 15% of the viscous oil in Alberta. This region remained under the radar until 2006 when Shell paid $465 million for 88,576 hectares of land representing an average of $5,246 per hectare. Laricina Energy, a private Canadian company with lands further north of Oil Reserve, commenced a SAGD Pilot Plant operation on December 23, 2010. In a recent press release Laricina announced that during a test cycle from a newly drilled well-pair at Saleski, they "Achieved our greatest peak bitumen production rate to date of more than 1,200 barrels per day." Subject to availability of capital, Oil Reserve is planning a fall drilling program which includes drilling of the Viking and Nisku formations. There will also be follow up exploration on the success of the work conducted on the Grosmont wells. Most of these locations are based on seismic interpretation. A potential of 3 to 4 locations will be drilled offsetting the 1-24 well in an effort to delineate a "sweet-spot".

Summary of Resource Reports

Management has received three resource studies prepared by AJM Deloitte, dated Feb 1, 2012 (Athabasca Grosmont Technical Report). March 31, 2012 (Athabasca Viking/Grand Rapids/Nisku Technical Report) and January 15, 2012 (Peace River Technical Report). These reports indicate significant undiscovered oil-originally-in-place for both the Peace River and Athabasca areas, and have been prepared in accordance with National Instrument 51-101 entitled Standards of Disclosure for Oil and Gas Activities. Below is a summary of certain values as reported in these reports. Definitions are included at the end of this press release, and disclosure is qualified by reference to the full Technical Reports which are available on the Oil Reserve website at www.oilreserveinc.com.

Athabasca
Grosmont Formation
Resource Class Low Estimate
(Mstb
) Best Estimate
(Mstb
) High Estimate
(Mstb
)
Prospective Resources 13,342.0 40,903.0 125,400.0
Unrecoverable 3,053,069.0 7,757,850.0 19,709,044.0
Total Undiscovered PIIP 3,066,411.0 7,798,753.0 19,834,444.0

Effective February 1, 2012

This table taken from page 2 of the Resource Study written for Oil Reserve Inc. entitled, "Grosmont Formation Athabasca, Alberta" dated February 1, 2012. Prepared by L.Kis. P.Eng., & L.J. Machula, P.Geol of AJM Deloitte.

Athabasca
Nisku, Viking and Grand Rapids Formations
Resource Class Low Estimate
(Mstb
) Best Estimate
(Mstb
) High Estimate
(Mstb
)
Prospective Resources 1,828.0 5,493.0 20,456.0
Grand Rapids 304.0 655.0 1,412.0
Nisku 1,120.0 4,702.0 19,738.0
Unrecoverable 2,037,127.0 3,348,787.0 5,554,649.0
Total Undiscovered PIIP 2,038,955.0 3,354,280.0 5,575,105.0
Total PIIP 2,038,955.0 3,354,280.0 5,575,105.0
Viking 1,419,623.0 2,460,916.0 4,265,977.0
Grand Rapids 4,437.0 8,461.0 16,133.0
Nisku 233,075.0 671,933.0 1,937,121.0

Effective March 31, 2012

This table taken from page 3 of the Resource Study written for Oil Reserve Inc. entitled, "Viking. Grand Rapids. and Nisku Formations Athabasca, Alberta" dated March 31, 2012. Prepared by D.S.Ashton, P.Eng., L.J. Machula, P.Geol. & D.L.Horbachewski, P.Geol. of AIM Deloitte.

Peace River - Manning and Seal Area
Deholt, Elkton and Pekisko Formations
Resource Class Low Estimate
(Mstb
) Best Estimate
(Mstb
) High Estimate
(Mstb
)
Prospective Resources (Debolt/Elkton) 15,440.0 30,750.0 59,570.0
Unrecoverable 1,710,062.0 2,789,313.0 4,571,963.0
Total Undiscovered PIIP 1,725,502.0 2,820,063.0 4,631,533.0

Effective January 15, 2012

This table taken from page 2 of the Resource Study written for Oil Reserve Inc. entitled, "Mississippian Carbonates Peace River Arch, Alberta" dated January 15, 2012. Prepared by L. Ki, P.Eng & L.J. Machula, P.Geol. of AJM Deloitte.

Operations Update

The Corporation's lands have heavy oil resource potential in multiple prospects on the Carbonate trend of northern Alberta. In the Athabasca area, the Corporation has assembled 621 sections (17.25 townships) prospective for the Grosmont and Nisku carbonate zones. The API for these two zones is generally between 5-10 degrees. In addition, the API for the Viking and Grand Rapids bitumen sands are in the range of 8-11 degrees. In the Peace River area, the Corporation has assembled 297 sections of land (8.25 townships) prospective for the DeboIt, Elkton, Shunda, and Pekisko zones. The API range for these carbonate zones is typically 11-15 degrees.

In the Athabasca area, two wells targeting the Grosmont formation have been drilled, cored, logged and analyzed. (Nixon 12-1 and 1-24-72-17W4). The first well (12-1) encountered a thick Grosmont isopach of 140 metres which includes a thick D unit of 55 metres. The D unit (which is the prospective zone beginning at the Paleozoic unconformity) consists of shaly limestone and low permeable dolomite. Core analyses indicate an oil saturation of 50-70 % with 20-25% porosity from the low perm zone. The second well (1-24) also encountered a thick Grosmont isopach of 130 metres. The D unit is 45 metres thick and core analyses from the upper 25 metres of this zone indicate a low to high (234 millidarcies) permeable dolomite with low to high 23% porosity. Oil saturation ranges from 54% to 85%. The 1-24 well also drilled a 10 metre porous oil zone established from log analyses in the B unit which is a discovery. However, no core was recovered due to lost circulation. As a comparison, some wells on lands in the Athabasca area drilled for the Grosmont formation in the equivalent D unit (above the marly marker), show a permeability range from 35 to 400 millidarcies with porosity of 15-35% (fractured) and oil saturation of 45-92%. Trade data has been acquired on the Nixon area and seismic interpretation indicates that the "sweet spot" is adjacent to the east and northeast of the 1-24 well. Additional locations have been determined to test the validity of the area and future SAGD potential.

In the Peace River area, one well was drilled, cored, logged, completed and analyzed (Manning 15-35-89-23W5). Results from logs and core analyses demonstrate proof of in- place hydrocarbons for both the Debolt and Elkton formations. Prospective resource numbers have been assigned to the well and surrounding acreage. Both of the formations were acidized but did not flow "cold". Additional locations still hold potential cold production but SAGD is so far the preferred mode of production. Acquisition of trade seismic and drilling of surveyed locations is being planned as the next stage of development in the Peace River area. Alternatively, seismic surveys are also being examined as a viable option to pursue a pilot project.

Strategic Alternatives Process

The Corporation is actively seeking strategic alternatives in order to enhance shareholder value. Alternatives to be considered by the Corporation may include joint ventures, the sale of assets, sale of the Corporation or otherwise. To assist with this process, the Corporation has retained Statesman Corporate Finance LLC ("Statesman") of Houston, Texas. Sid Shaver, Managing Director of Statesman, who has considerable international experience and connections to the oil and gas industry, is the Corporation's primary contact at Statesman. Shareholders will be kept apprised of developments.

Shareholders' Meeting

Given the ongoing strategic alternatives process described above. Management has been delaying the annual general meeting of shareholders in case a transaction requiring shareholder approval resulted from the process. Regardless of whether or not such a transaction is identified, the Corporation intends to hold a meeting of its shareholders prior to the end of Q1, 2013.

Further Information

For further information regarding Oil Reserve Inc., please see our website at oilreserveinc.com or contact either of the parties listed below.

This news release contains certain statements that may be deemed 'forward-looking statements. Forward looking statements are statements that are not historical,facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although Oil Reserve Inc. believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or realities may differ materially from those in forward looking statements. Forward looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. Except as required by law, Oil Reserve Inc. undertakes no obligation to update these forward- looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.

Resource Definitions

The term "resources" encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including Discovered and Undiscovered (recoverable and unrecoverable) plus quantities already produced. Accordingly, total resources are equivalent to Total Petroleum Initially-In-Place ("PIIP").

Total Petroleum Initially-ln-Place ("PIIP") is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered (equivalent to "total resources").

Discovered Petroleum Initially-In-Place (equivalent to discovered resources) is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of Discovered Petroleum Initially-In-Place includes Production, Reserves, and Contingent Resources; the remainder is unrecoverable.

Unrecoverable is that portion of Discovered and Undiscovered PIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur: the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

Undiscovered Petroleum Initially-In-Place (equivalent to undiscovered resources) is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of Undiscovered Petroleum Initially-In-Place is referred to as Prospective Resources; the remainder as Unrecoverable.

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub- classified based on project maturity.

Uncertainty ranges

The range of uncertainty of estimated recoverable volumes may be represented by either deterministic scenarios or by a probability distribution. Resources should he provided as low, best, and high estimates as follows:

Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.

Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

This approach to describing uncertainty may be applied to reserves, contingent resources, and prospective resources. There may be significant risk that sub-commercial and undiscovered accumulations will not achieve commercial production. However, it is useful to consider and identify the range of potentially recoverable quantities independently of such risk.

Prospective Resources: Not all exploration projects will result in discoveries. The chance that an exploration project will result in the discovery of petroleum is referred to as the "chance of discovery". Thus, for an undiscovered accumulation the chance of commerciality is the product of two risk components - the chance of discovery and the chance of development.

Contact Information

  • Oil Reserve Inc.
    Todd D. Montgomery
    CEO
    403-294-5731

    Oil Reserve Inc.
    Suite 700. 1300 - 8th Street SW
    Calgary. AB T2R 1B2
    rgodin@proventurelaw.com

    Statesman Corporate Finance LLC
    Sid Shaver
    Managing Director
    713.590.4697

    Statesman Corporate Finance LLC
    1900 West Loop South, Suite 1010
    Houston. Texas 77027
    sshaver@statesmanhiz.com