Solimar Energy Limited
ASX : SGY
TSX VENTURE : SXS

Solimar Energy Limited

March 29, 2012 11:59 ET

Solimar Energy: Paloma Deep Operations Update: New Oil Pool Discovery

Highlights

- Second Monterey Oil Shale Zone recovers oil and gas

- Lower Stevens Sandstone / Fruitvale Shale previously tested at significant flow rates

- Potentially commercially productive zones have now been tested at three levels with additional, shallower zones still to be tested

- Rig secured to enable follow up drilling to commence by late April 2012

MELBOURNE, AUSTRALIA--(Marketwire - March 29, 2012) - Solimar Energy Limited (ASX:SGY) (TSX VENTURE:SXS) ("Solimar" or the "Company") is pleased to provide the following update regarding the ongoing production testing operations at its Paloma Deep discovery, located in the San Joaquin Basin, onshore California. Testing operations have been ongoing since December 2011 over multiple hydrocarbon bearing intervals.

The latest testing operation is of the Lower Antelope Shale, which as with the deeper Fruitvale Shale is a member of the prolific Monterey Shale Formation. This Antelope Shale zone has produced oil and gas in the Paloma Deep ST/2 well during swabbing operations from an interval of naturally fractured interbedded chert, siliceous shale and sandstone. The recovery so far of 35 barrels of 29.9° API gravity oil with associated gas from this zone on an unstimulated basis is significant in that these preliminary results are similar to early results from wells in several fields in the area which also produce from the Monterey Shale (see attached figures).

Paloma project operator Neon Energy estimates some 366 feet of gross pay (276 feet net) in the Antelope Shale section currently being tested which is expected to be ubiquitous across the Joint Venture's 2,847 gross acres position on the Paloma anticline. If oil resource statistics similar to those for the surrounding fields can be replicated, then there is potential to prove up a significant light oil resource. Data published by the largest adjacent field operator Occidental Petroleum (OXY) and by the California Division of Oil, Gas and Geothermal resources (DOGGR)(1) indicate that average flow rates for vertical, artificially stimulated, Monterey Shale producing wells average initial production rates (IP's) of some 170 BOEPD and recover over 350,000 barrels of oil equivalent per well. Well spacings, due to the thick reservoir intersections, can be as dense as 10 acres for vertical wells and based on the DOGGR database, Solimar estimates average well spacing of just 15 acres.

Further drilling and production testing will be required to determine if the regional estimates are applicable to the Paloma project. The joint venture also proposes to investigate whether modern stimulation techniques coupled with horizontal development drilling could potentially accelerate the ultimate recovery of oil from this zone.

For further reference, the US Energy Information Administration(2) estimates that the California Monterey Shale play has the potential for 15.42 billion barrels of technically recoverable oil, compared to the Bakken's 3.59 billion and the Eagle Ford's 3.35 billion.

During the next few weeks, the Joint Venture plans to pump test the lower Antelope Shale oil zone in the current well in order to further assess its economic viability.

Based on the encouraging results to date plans are also advanced for follow-up drilling with well sites already permitted and a rig secured which could result in commencement of drilling by late April. Current plans are to drill the Paloma Deep #2 as a well designed to evaluate the areal extent of the zones of interest penetrated in the discovery well, and to re-evaluate the Lower Stevens Sandstone and Fruitvale Shale (Monterey Shale) section which produced at an unstimulated and unassisted rate of 1.9 MMcfd (million cubic feet per day) and 226 BOPD (barrels of oil per day) of light oil/condensate prior to premature cessation of the test as a result of test tool plugging.

Since the last update, a shallower member of the Lower Stevens was also tested before moving up to the Antelope Shale zone and while an initial small gas flow was observed, it has now been determined that this sandstone section is non-commercial.

Commenting on the new oil pool discovery, Solimar CEO John Begg said:

"The results of the Company's drilling program at Paloma continue to validate the as yet unexploited potential within the Paloma oil field over which we have an expanded acreage position totaling some 2,847 gross acres. In effect, the Solimar JV is the second largest acreage holder over the Paloma anticline next to oil major OXY, an active competitor for acreage in the area. Potentially commercially productive zones have now been tested at three levels and there are still a number of shallower zones of hydrocarbon saturation higher in the well yet to be tested. The results further support Solimar's decision late last year to focus its resources on the exploitation of the Kreyenhagen and Paloma projects both of which now target the conversion of discovered oil resources to reserves and production. The Company is well advanced with a rationalistion of its portfolio to support the funding of these priority projects and is in receipt of cash offers for the sale of the Maricopa project"

Interests in the Paloma project are held:

Neon Energy (Operator): 75 %
Solimar Energy: 25 %

Further updates will be provided as the testing program progresses.

COMPETENT PERSONS STATEMENT: The information in this report has been reviewed and signed off by Will Satterfield B.S., M.A. who is a petroleum geologist with over 24 years of relevant experience within the oil and gas sector.

Sincerely,

John Begg, Chief Executive Officer, Solimar Energy Limited

References:

(1) www.conservation.ca.gov - Oil, Gas & Geothermal - DOGGR Home Page.

(2) US Energy Information Administration, July 2011, "Review of Emerging Resources: US Shale Gas and Shale Oil Plays".

Diagrammatic Overview of the Paloma Project, San Joaquin Basin, California

To view the image associated with this press release, please visit the following link:

http://media3.marketwire.com/docs/sgypaloma.jpg

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Contact Information

  • Solimar Energy
    +61 3 9347-2409