Reef Resources Ltd.
TSX VENTURE : REE

Reef Resources Ltd.

October 18, 2010 16:05 ET

Reef Resources Ltd. Initiates Gas Recycle and Enhanced Oil Recovery Pilot Project, Updates Progress on Ausable #2 Horizontal Well and Sales Gas Test Results

CALGARY, ALBERTA--(Marketwire - Oct. 18, 2010) - Reef Resources Ltd. (TSX VENTURE:REE) ("Reef" or the "Company") announces the successful initiation of its Gas Recycling and Enhanced Oil Recovery ("EOR") project on its Silurian pinnacle reef in South Western Ontario.

EOR and Recycle Program Successful in Producing Oil and Petroleum Condensate:

Reef Resources has started producing oil and petroleum condensates by recycling approximately 250 mcf/d of natural gas taken from two of its existing wells (Ausable # 1 and Ausable # 4) and injecting it back into Ausable # 3. The result is that oil and petroleum condensate are being produced from Ausable #1 and # 4.

This project is the pilot phase of the larger, full scale Enhanced Oil Recovery and Natural Gas Recycling ("EOR") program that the Company has analyzed and designed and will be executing in the near future. To date, the pilot project confirms the Company's assessment that the reef has the capacity to produce valuable natural gas liquids alongside enhanced oil production by pressurizing the reef with natural gas. Production rates from this pilot activity will be flow tested and reported on as soon as they are available.

The full EOR program involves purchasing natural gas for pressurizing the reef, drilling a total of four horizontal wells and installing a refrigeration plant to process and separate natural gas liquids. Up to 5 mmcf/day of natural gas will be recycled through the reef into two of the four new horizontal wells to pressurize the reef. The result is that oil and natural gas liquids (propane, butane and condensate) will be produced from the two new horizontal wells and Reef's existing four wells. The oil and natural gas liquids ("NGLs"), which are separated into propane, butane and condensate by the refrigeration plant, are then sold. Natural gas recycle and EOR projects of this type have been conducted in Western Canada and globally with excellent results. Reef's goal is to have the four horizontal wells and on-site infrastructure (refrigeration plant, separators, and bullet tanks) in operation by spring 2011.

"EOR has been proven effective in achieving up to 80% recovery rates in other liquid rich reservoirs." stated Arnie Hansen, President.

Natural Gas Testing:

The extremely warm temperatures during the summer in S.W. Ontario affected the Company's existing natural gas processing equipment and its ability to remove NGL components from its natural gas. Reef intends to have the gas retested and with cooler prevailing temperatures, expects to meet the local utilities gas specifications. Once the gas meets the utility's specifications, the Company can decide whether to sell the gas to the utility, reinject it back into the reef to produce oil and condensate or a mix of the two options. The previous tests have confirmed that Reef's gas is very liquids rich thus supporting the decision to use a gas recycle and EOR program to maximize the value of its key asset.

Ausable # 2 horizontal Frac:

The Company is in the process of mobilizing a coiled tubing unit from Alberta to clean out frac sand that has stalled production from its Ausable #2 horizontal well completed in August. The coiled tubing unit will be leaving Alberta tomorrow (Oct 19) or early Wed AM. It will take three days to arrive. Reef plans on clean out Sun (Oct 24) or Monday. The Company will report on the results and production flow tests when available.

The Company has identified three additional Silurian pinnacle reefs within its 23,000 acre 3D seismic database. Reef is in preliminary discussions with another company that also has identified additional pinnacle reefs in the same region. Due diligence will reveal if a joint venture should be pursued to co-develop the other company's reefs using a gas recycle and EOR program.

Reef was formed to participate in the exploration, development and production of conventional crude oil and natural gas reserves in Ontario and western Canada. The Company's strategy is to build shareholder value through internally generated exploration and development drilling and through selective acquisitions. Reef received a $1.65 million CDN participating loan commitment from Solo Oil plc, an AIM listed international oil and gas exploration and development company on April 29, 2010. Reef has received $750,000 of the loan commitment.

The Company's Ontario asset has gas storage rights, gas re-injection permit for gas recycle, NGL recovery, arbitrage and enhanced oil recovery. A key component of Reef's Ontario strategy is to identify and exploit undervalued prospects in the Ontario basin by utilizing the company's 23,500 acres of proprietary 3D seismic. In addition to its Ontario Properties, Reef has identified multiple oil and gas acquisition and development opportunities throughout Canada.

Forward Looking Statements — This news release contains certain forward-looking statements, which include assumptions with respect to the valuation of Reef's reserves, funds raised from a financing and future capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

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. Not for distribution to US Newswire Services for dissemination in the United States.

Contact Information

  • Reef Resources Ltd.
    Arnie Hansen
    President & CEO
    (403) 251-9447
    or
    Reef Resources Ltd.
    Larry Olson
    Vice President, Finance
    (250) 460-2640