TSX Venture Symbol: DIG
NEWS RELEASE : Update
February 1, 2006
FUTURE Projects
Digger Resources Inc. (“DIG” or the “Company”) sees its High Definition Reservoir Geochemistry (“HDRG”) technology as an innovative, powerful and cost effective exploration tool to assist with exploration for new hydrocarbon reserves, especially in support of the developing Mackenzie Valley gas pipeline system. Due to the high cost of drilling in the Mackenzie Delta and elsewhere in northern Canada, including the Beaufort Sea, and with 3D seismic in excess of $45,000 km2 oil and gas operators are looking for new exploration tools. As earlier reported DIG has already completed sizeable HDRG sampling programs in the Mackenzie Delta, Yukon and northern British Columbia for a major oil and gas explorer. The goal of these surveys was to template oil and gas accumulations in the area to see if there was a significant geochemical signal at surface. The lands chosen for the surveys were covered by extensive 3D seismic and numerous wells that defined the subsurface distribution and hydrocarbon distribution. The results from these HDRG surveys matched in all respects the subsurface hydrocarbon distribution. The outcome of these surveys has positioned DIG’s HDRG technology as a primary exploration tool to be used by participating companies for oil and gas exploration in Northern Canada and other frontier areas.
DIG is still in the process of facilitating HDRG orientation surveys over existing oil and gas fields in the Beaufort Sea. HDRG survey samples are to be collected from the seabed by a research vessel operated under the auspices of several Federal Government Research Departments. The purpose of this survey is to initially “fingerprint” the HDRG response over proven fields, such as Amauligak with 700,000,000 boe, and then subsequently utilize the technology to verify the hydrocarbon prospectivity of existing, un-drilled seismic targets as well as the development of new targets based solely on HDRG technology. This exercise will test HDRG technology and hopefully confirm its ability to generate geochemical anomalies from offshore hydrocarbon accumulations. The results of this survey will form the basis of a subsequent announcement by DIG.
DIG is currently structuring a joint venture agreement with a major oil and gas explorer whereby DIG will earn an interest in future production from a multi-well drilling program to be located by HDRG surveys on freehold acreage owned by the oil and gas explorer. DIG has undertaken and completed an extensive road allowance survey and HDRG orientation studies over known producing wells and dry holes proximate to this acreage. The results gleaned from these surveys will allow the HDRG technology to effectively ‘fingerprint’ the geochemical responses associated with these hydrocarbon accumulations. This ‘multi-species fingerprint’ will then be used for locating and defining drill targets on the freehold acreage. The terms of the agreement, when executed, will form the basis of a future announcement by DIG.
DRILLING RESULTS
As earlier reported DIG advised that the application of DIG’s High Definition Reservoir HDRG technology in the Suffield District, southwestern Saskatchewan has resulted in the discovery of two commercial oil wells for Green Dragon Investment Ltd (“Green Dragon”), a Calgary based investment company. Both Green Dragon wells were located and drilled solely on the basis of an HDRG geochemical anomaly. Neither of the drilling targets was supported by any seismic or geological information / interpretation available to Green Dragon.
Development Well 4-13-14-19W3M (“4-13”)
The 4-13-14-19W3M development well drilled by Green Dragon in September 2002 has a production capability of plus 150 BOPD after intersecting Roseray sands in a 50 year old reservoir at a depth of 3500 feet. By comparison the current production history of surrounding Roseray producing wells is in the 40 – 50 BOPD range. An older production well drilled in the 1950’s, the 2-13-14-19W3M well that is located 700m east of the Green Dragon 4-13 well, is still capable of producing 20 BOPD and has historically produced in excess of 800,000 barrels of oil. Based on seismic interpretation a third party drilled the 3-13-14-19W3M well, located 300m east of Green Dragons 4-13 well, in January 2002. This position was thought to be up-dip of the older 2-13-14-19W3M producing well. This interpretation, based on seismic interpretation alone, proved incorrect with the 3-13-14-19W3M well intersecting the target stratigraphy down dip and the well was subsequently non-economic to produce. Green Dragon drilled its successful 4-13 well based solely on the HDRG response from surface soil samples.
Exploration Well 3-1-14-19W3M (“3-1”)
The 3-1-14-19W3M vertical exploration oil well, located 3 km southeast of Green Dragon’s 4-13 development well, was drilled by Green Dragon in late September 2005 and completed as an oil well in October 2005. Due to production problems resultant from a 20 tonne sand frac to stimulate the Lower Shaunavon Formation, the more conventional and accepted practice is to use an acid frac to stimulate production, and because of the time and remediable actions required to try and reverse the negative impact caused by the sand frac the 3-1 well has only just recently been able to produce from the Lower Shaunavon zone on a consistent basis. The frac may have gone through to the water leg of the reservoir thereby giving the 3-1 well a much higher-water cut and lower production rate than would have been associated with the more conventional acid frac. Over 30 operational days the 3-1 well produced approximately 10 BOPD with an average water-cut of 90% from this zone. Green Dragon is hopeful that with continuous production from this zone that the oil-cut will stabilize at a higher rate. A zone in the Upper Shaunavon Formation has been evaluated and just completed. The oil produced from the Upper Shaunavon and Lower Shaunavon Formations will be commingled. Green Dragon plans to monitor and analyze the performance from these two zones for plus 30 days before completing the prospective uphole Roseray zone. Green Dragon has also advised DIG that two other targets identified by HDRG sampling on its P&NG leases will now be drill tested in early 2006 subject to regulatory approval and rig availability. The results from this drilling program will form the basis of a future announcement by DIG.
The Green Dragon HDRG anomalies were consistent with characteristic patterns observed over known oil fields in the Suffield District and DIG’s HDRG technology again confirmed its ability to precisely define an anomaly related to hydrocarbon accumulations that, for reasons of reservoir thickness and geological contrast, previous seismic programs were unable to resolve. Work in the Suffield District suggests that the highest HDRG responses at surface appear to be reflecting the zones of maximum hydrocarbon accumulation that correspond to ‘stratigraphic high’s’ thereby identifying the optimum target position for a well to be located.
HDRG TECHNOLOGY
The focus of DIG’s HDRG program of work over the last number of years has been to develop a rapid cost effective exploration technique, as an adjunct to existing seismic methods, through the detection of metallic and non-metallic ions in near surface soil profiles. The presence of various metallic and non-metallic ions forming geochemical signatures directly above oil and gas accumulations has been well documented by industry. In the past it has been difficult to measure these anomalies both accurately and with a high degree of repeatability, which has severely hampered its applicability and value for hydrocarbon exploration.
Research directed and subsequently published by DIG’s strategic partner, MMI Technology (“MMI”), into metal ion geochemistry during the last 15 years has seen the successful global acceptance and application of this technology to mineral exploration for buried base and precious metal deposits. DIG entered into a licensing agreement, effective July 5, 1999, which provides exclusivity to DIG of MMI’s Mobile Ion Geochemistry HDRG leach and its global application to hydrocarbon exploration.
The work completed by DIG has shown that the application of its proprietary metallic/non-metallic ion deep penetrating geochemistry has successfully addressed the previous problems in applying soil geochemical techniques when exploring for oil and gas reserves. DIG’s technology is based on the collection and analysis of near surfacesoil samples using a proprietary leachant and ultra low-level Inductively Coupled Plasma (“ICP”) analyses. Over the last 5 plus years DIG has completed upwards of 15 orientation surveys over existing oil and gas fields using DIG’s technology and have in all of these surveys found a sharp anomaly, over background, residing vertically over the oil and gas accumulations and a completely flat response over the dry wells in the same area. These anomalies were consistent with patterns characteristic with the oil traps discovered in the 3-1-14-19W3M and 4-13-14-19W3M Green Dragon wells.
Some of the key benefits offered by HDRG technology are summarized hereafter:
- The HDRG survey generates direct hydrocarbon anomalies rather than a series of structural traps of unknown fluid composition;
- HDRG orientation studies over known hydrocarbon accumulations permits the technology to effectively ‘fingerprint’ the geochemical responses associated with these accumulations. This ‘multi-species fingerprint’ can then be used for the assessment of companies’ seismic and drill targets as well as extensions to existing oil and gas fields;
- HDRG is a robust exploration tool not subject to the variations of previous geochemical techniques that have produced inconsistent and unreliable results to date. A typical HDRG survey can involve the analysis of over 21 individual species or elements. This multi-element data is then presented as PSI (Petroleum Significance Indicator) maps for interpretation;
- An HDRG survey produces a highly detailed PSI map of the hydrocarbon accumulation. It can prove invaluable in the locating of both vertical and horizontal wells as well as the planning and implementation of secondary recovery processes such as water injection;
- HDRG surveys do not require any form of approval process, with the exception of the approval by the surface landowner, and accordingly the surveys can be completed quickly and confidentially and there is no need to share the results with a third party mineral title holder. This process allows for a creative land evaluation process that effectively permits one to quickly assess the potential offered in a particular area before any decision is made regarding land acquisition;
- HDRG has demonstrated the ability to detect anomalies from hydrocarbon accumulations that, for reasons of reservoir thickness and geological contrast, are beneath the ability of seismic to resolve.
The Company believes that its HDRG technology has the potential to offer a significant technological advance in the search for new oil and gas reserves both in new and mature fields.
Digger Resources Inc.
Signed / "Norman B. Yeo"
Norman B. Yeo, President, CEO
For further information, please contact or:
Norman B. Yeo @ Phone: 403-290-1913 Fax: 403 261-7015
THE TSX VENTURE EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE INFORMATION CONTAINED HEREIN
1
12 Sierra Morena Way S.W.
Calgary, Alberta T3H 3E4
Tel: 403 290-1913 Fax: 403 261-7015