SANTA BARBARA, CA,
May 23, 2012 /PRNewswire/ -
Underground Energy Corporation ("Underground", "UGE" or the
"Company") (TSX VENTURE: UGE; OTCQX: UGGYF) today announced that it
reached target depth of 7,685 feet in the Chamberlin 3-2 well at
the 7,750 acre Chamberlin lease in the Zaca Field Extension Project
in Santa Barbara County,
California. The Company holds an 80% working interest in the
Chamberlin lease, which surrounds the existing Zaca Oil Field on
three boundary sides. The Chamberlin 3-2 well is a "twin" well
offsetting the previously drilled Chamberlin 4-2 well by
approximately 300 feet. This well was designed to directly
target the Chamberlin East Fault Block that was discovered during
the drilling of the Chamberlin 4-2 well. The information gained in
drilling the Chamberlin 4-2 well was used in designing and drilling
the Chamberlin 3-2 well.
The Chamberlin 3-2 well encountered
approximately 1,700 feet of oil saturated shale oil shows,
including more than 1,200 feet of continuous Monterey oil shows in the deeper Chamberlin
East Fault Block. An extensive suite of open hole logs were
completed on May 20, 2012 and
confirmed that the oil saturation, fracture intensity, and
formation thickness in the lower Monterey reservoir are consistent with the
productive Monterey sections in
the shallower fault block in the original Zaca Oil Field to the
west of the Chamberlin 3-2 well. Typically the wells at the
original Zaca Oil Field had approximately 1,100 feet of pay.
On the strength of these initial drilling
results, the Company intends to complete, stimulate, and begin
production testing the lower continuous 1,200 feet Monterey shale interval of the Chamberlin 3-2
well. These production test results are expected by mid-June.
In the original Zaca Oil Field, the 61 wells drilled on 10-acre
spacing (including later infill wells) had average initial
production rates in excess of 200 barrels of oil per day (bopd) and
cumulative production of more than 540,000 barrels of oil.
The Key 98 drilling rig will be moved to a
drilling pad to the west of the Chamberlin 3-2 well and will drill
a 4,350 foot well, the Chamberlin 2-2 well, into the shallower
fault block of the Monterey shale.
This well will offset two wells in the original Zaca Oil Field
which have each produced in excess of 500,000 barrels of oil.
Subsequent to drilling the Chamberlin 2-2, the Key 98 rig will be
released from contract. In view of the discovery of the new
Chamberlin East Fault Block, and the potential of additional deeper
structures which Underground has identified by seismic, the Company
has begun negotiations for a larger rig that is capable of more
effectively drilling into these new structures. Subject to
finalization of a drilling contract, it is anticipated that the
larger rig will be mobilized and moved to the Zaca Extension
Project in approximately 45 to 55 days to continue the Company's
drilling program.
"The data gained from the drilling and logging
of the Chamberlin 3-2 well mirrors and validates what we saw in the
Chamberlin 4-2 well before we encountered mechanical and resulting
well bore stability issues. With the knowledge gained from drilling
the Chamberlin 4-2 well, we successfully designed and drilled the
Chamberlin 3-2 well. We can now assess the full extent of the
key oil bearing formation which has demonstrated extensive, high
quality oil saturation. In addition, we are pleased to have met our
targeted well budget of $2.4 million
for the Chamberlin 3-2 well and are confident that we will continue
to improve our well cost efficiency," said Mike Kobler, President and CEO of Underground
Energy. "We will immediately move forward with the completion and
production testing of the Chamberlin 3-2 well now that we have
confirmed the discovery of the Chamberlin East Fault Block, along
with the potential for virgin oil production east of the original
Zaca Oil Field."
In the past week, the Company also entered into
a lease on a nearby 3,334 net acre parcel of land which the Company
believes to have similar potential to the Zaca Field Extension
Project. The addition of the new lease brings Underground's
current acreage position in the Zaca Extension Project to 11,084
gross/9,534 net acres and a total of 16,934 gross/15,384 net acres
in the immediate vicinity of the Greater Zaca Project area.
About Underground Energy Corporation
Underground is focused on identifying, acquiring
rights to, exploring for, developing and producing oil reserves
from shale formations in North
America using the latest exploration and recovery techniques
and technologies. Underground focuses on identifying and acquiring
sizable land positions and prospects in historically prolific but
under-explored shale formations as well as in emerging shale plays
that, in both instances, hold large volumes of prospective
resources. Underground currently holds hydrocarbon rights on
approximately 70,000 net acres of highly prospective lands in
California and Nevada with an initial focus on the
Monterey shale in California. Underground is listed on the TSX
Venture Exchange under the ticker symbol "UGE" and is quoted on the
OTCQX under the symbol "UGGYF". For more information on
Underground, including a copy of the Company's latest corporate
presentation, please visit www.ugenergy.com. Underground's
regulatory filings are available under the Company's profile at
www.sedar.com.
Cautionary Statements
Statements in this press release contain
forward-looking information and forward-looking statements within
the meaning of applicable securities laws (collectively,
"forward-looking information"). Forward-looking information
is frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. In particular, forward-looking
information in this press release includes, without limitation,
statements with respect to: (i) the nature of the formation
encountered by the Chamberlin 3-2 well; (ii) the
Company's plans to complete, stimulate, and begin
production testing the lower continuous 1,200 feet of Monterey
Shale interval with the Chamberlin 3-2 well and the availability of
production results by mid-June; (iii) the Company's plans to move
the Key 98 drilling rig to a drilling pad to the west of the
Chamberlin 3-2 well and drill the Chamberlin 2-2, a 4,350 foot well
into the upper fault block of the Monterey Shale; (iv) the
contracting of a larger drilling rig and mobilization of such right
to Zaca in approximately 45 to 55 days; and (v) the Company's
expectation with respect to improving well cost
efficiency.
Although we believe that the expectations
and assumptions reflected in the forward-looking information are
reasonable, there can be no assurance that such expectations or
assumptions will prove to be correct. In particular, assumptions
have been made that: (i) the formations encountered by the
Chamberlin 3-2 well will demonstrate characteristics similar to
formations encountered by other industry participants that have
drilled wells on the Zaca Field; (ii) Underground will be able to
obtain equipment, qualified staff and regulatory approvals in a
timely manner to carry out its planned exploration and development
activities; (iii) Underground will have sufficient financial
resources with which to conduct its planned capital expenditures;
and (iv) the current regulatory and tax regime will remain
substantially unchanged. Certain or all of the forgoing assumptions
may prove to be untrue.
Forward-looking information is based on
the opinions and estimates of management at the date the statements
are made, and is subject to a variety of risks and uncertainties
and other factors (many of which are beyond the control of
Underground) that could cause actual events or results to differ
materially from those anticipated in the forward-looking
information. Some of the risks and other factors could cause
results to differ materially from those expressed in the
forward-looking information include, but are not limited to:
operational risks in exploration, development and production;
delays or changes in plans; competition for and/or inability to
retain drilling rigs and other services; competition for, among
other things, capital, acquisitions of reserves, undeveloped lands,
skilled personnel and supplies; risks associated to the uncertainty
of reserve and resource estimates; governmental regulation of the
oil and gas industry, including environmental regulation;
geological, technical, drilling and processing problems and
other difficulties in producing reserves; the uncertainty of
estimates and projections of production, costs and expenses;
unanticipated operating events or performance which can reduce
production or cause production to be shut in or delayed; incorrect
assessments of the value of acquisitions; the need to obtain
required approvals from regulatory authorities; stock market
volatility; volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations; access
to capital; and other factors. Readers are cautioned that
this list of risk factors should not be construed as
exhaustive.
The forward-looking information contained
in this news release is expressly qualified by this cautionary
statement. Underground does not undertake any obligation to
update or revise any forward-looking statements to conform such
information to actual results or to changes in our expectations
except as otherwise required by applicable securities
legislation. Readers are cautioned not to place undue
reliance on forward-looking information.
Information in respect of the initial
production rates and cumulative production from wells drilled by
other industry participants on the Zaca field may be considered to
be "analogous information" as defined National Instrument
51-101. Underground is unable to verify whether such
information has been prepared in accordance with NI 51-101 and the
Canadian Oil and Gas Evaluation Handbook and Underground is unable
to confirm whether such estimates have been prepared by a qualified
reserves evaluator. The information on the historic production of
wells drilled by other industry participants on the Zaca Field was
obtained from California Division of Oil, Gas and Geothermal
Resources on August 24, 2011. The
information has been provided to demonstrate the potential for
similar initial production rates and aggregate production for
certain wells drilled or to be drilled by Underground at the Zaca
Field, although there can be no assurance that the wells drilled or
to be drilled by Underground will demonstrate production
characteristics to such historic wells or at all.
Neither the 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.
SOURCE Underground Energy Corporation