Solimar Energy Limited
ASX : SGY
TSX VENTURE : SXS

Solimar Energy Limited

July 11, 2012 09:15 ET

Solimar Receives Government Permit for Steam Enhanced Production Testing at Kreyenhagen

MELBOURNE, AUSTRALIA--(Marketwire - July 11, 2012) -

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Solimar Energy limited (ASX:SGY) (TSX VENTURE:SXS) ("Solimar" or the "Company") is pleased to announce that it has received formal approval from the California regulatory authorities to conduct steam enhanced oil production testing of its 100% owned Kreyenhagen oil field project. This project contains a number of existing oil and gas discoveries that Solimar is in the process of appraising and redeveloping.

The Cyclic Steam Project Permit was attained within seven months of application after review by all applicable government departments lead by the California Division of Oil, Gas and Geothermal Resources (DOGGR) and following a period allowing for public comment.

Solimar will soon be commencing a two phase production testing program at Kreyenhagen where there is independently assessed, unrisked oil in place of up to 79 MMBBLS* net to the Company's working interest. The 13 to 18 degrees API gravity oil is contained in a shallow sandstone oil reservoir (the Temblor Sandstone) which has produced at unstimulated initial production rates of 1-21 BOPD in numerous vintage wells.

As announced on April 20, 2012 Solimar's testing program will utilise up to 4 suspended wells previously drilled in 2007. The first phase or "Cold Flow" testing program will involve zonal production testing using modern completion equipment and methods. A work over rig is currently being contracted for this phase of work. The second phase, for which the Permit to Steam is required, will involve alternating periods when steam is injected into the oil reservoir and allowed to "soak" followed by oil production periods. This cyclic steam or "Huff and Puff" test program will be initiated in late 2012 once the Company's 20MMBTU portable steam generation unit (for which construction has already been contracted) has been delivered and installed.

In addition to the Permit to Steam, the Company is also progressing the permitting of multiple, new well sites located to better define the extent of the existing oil discoveries and to provide detailed reservoir information for the three main oil productive horizons in the project area. These being the Temblor Sandstone which contains the heavy oil, the Avenal Sandstone within which light oil and gas has been discovered and the Kreyenhagen Shale. Potentially large volumes of in place light oil are present in the Kreyenhagen Shale within the Company's extensive acreage holdings. The Kreyenhagen Shale regional oil play is attracting increasing major company interest in the area and will be the subject of a future dedicated evaluation program by Solimar.

Commenting on the issue of the Permit to Steam, Solimar CEO John Begg said:

"Securing this important milestone permit in such a timely manner testifies to the effectiveness of the Solimar operating team in California. It represents a further step in the appraisal and the anticipated redevelopment and commercial production of oil from the Kreyenhagen field".

Sincerely

John Begg, Chief Executive Officer

Solimar Energy Limited

References:

* Resource Assessment of Certain P&NG Holdings in the Kreyenhagen Area for Solimar Energy Limited (as of 31 October, 2011) - By Sproule Unconventional Limited. This report was highlighted in a release to the ASX and Canada on 18 November, 2011 and published in full on 22 November, 2011.

A copy of this report is on Solimar Energy's website under "Investor Centre" and "Resources Reports".

ABN 42 112 256 649

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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