UTS Energy Corporation is pleased to announce the results from the 2006/2007 drilling program completed on the following properties:
1. Lease 14;
2. Leases 311, 468, 470 and 477 (the "Lease 311 Area"); and
3. The southern boundary of Lease 840.
Lease 14
Lease 14, which is owned 50 per cent by UTS and 50 per cent by Teck Cominco Limited, comprises 7,147 acres on the west side of the Athabasca River, directly across the river from the northern boundary of the Fort Hills Oil Sands Project and bisects oil sands leases associated with the proposed Pierre River Mine operated by Shell Canada.
In 2006 Norwest Corporation, an independent geological and engineering consulting company, derived Low, Best and High estimates of 51, 190 and 493 million barrels of bitumen in place using the 28 core holes drilled in early 2006. These estimates were classified as Discovered Resources using standard mining criteria and a Total Volume:Bitumen in Place cutoff of 16:1. Further, Norwest developed mining pit shells on Lease 14 based on the presumption of ore continuity between the wells. Based on Norwest's pit shell analysis, UTS Management's previously disclosed estimate of recoverable bitumen was 400 million barrels using a TV:BIP cutoff of 16:1.
The 2007 drilling program included a further 96 core holes on Lease 14 for a total of 124 core holes on Lease 14, or 16 holes per section, over the mineable area. This drilling density is now sufficient to provide a contingent resource estimate which is currently being completed by an independent evaluator and is expected in the first quarter of 2008.
Norwest was also engaged by UTS and Teck Cominco to provide an estimate of recoverable bitumen on Lease 14 at a TV:BIP cutoff of 16:1 incorporating all of the relevant data, including the results of the 2007 drilling program. This estimate by Norwest now fixes the transaction volume at 400 million barrels for the UTS disposition of a 50 per cent working interest in Lease 14 to Teck Cominco at $200 million, based on a price of $1 per barrel of bitumen.
Lease 311 Area
The Lease 311 Area, which is owned 50 per cent by UTS and 50 per cent by Teck Cominco, comprises approximately 26,880 acres on the west side of the Athabasca River, approximately 10 kilometres north of Lease 14.
The 2007 drilling program encountered potentially mineable oil sands in 48 wells over an area covering approximately 23 sections based on approximately two core holes per section. Oil sands thicknesses range from approximately 15 metres to 45 metres with overburden thicknesses generally varying from 10 metres to 60 metres.
UTS retained Norwest to provide a preliminary assessment of the Lease 311 Area based on the results of the wells drilled. Norwest's estimates of Discovered Resources of bitumen based on the drilling density of two wells per section and a TV:BIP of 16:1 resulted in a Low Estimate of 279 million barrels; Best Estimate of 1,051 million barrels; and High Estimate of 2,791 million barrels. Norwest was also requested to develop a mineable pit shell on the assumption of continuity of oil sands between the core holes drilled and the same standard oil sands mining criteria as used in the Lease 14 analysis. UTS' Management has analyzed the results to date and believes that, based on the data and Norwest's pit shell analysis, the recoverable bitumen contained within the pit shell, effective December 3, 2007, is:
1.8 billion barrels using a cut-off of 12:1 TV:BIP, and
2.3 billion barrels using a cut-off of 16:1 TV:BIP.
Discovered Resources are defined as "those quantities of oil and gas estimated on a given date to be remaining in, plus those quantities already produced from, known accumulations. Discovered Resources are divided into economic and uneconomic categories, with the estimated future recoverable portion classified as reserves and contingent resources respectively". A more specific classification of these Discovered Resources can not be made at this time due to insufficient core hole data.
The significant positive factor is that 61 out of 63 core holes encountered oil sands indicating high prospectivity throughout the Lease 311 Area. The uncertainties relate to a drilling density requirement of approximately 16 wells per section to establish a high degree of certainty for a contingent resource classification. There is no certainty that it will be commercially viable to produce any portion of the resources.
UTS' Management believes that 16:1 TV:BIP is an appropriate cut-off to use for determining economic pit limits in the current oil price and operating cost environment and was the threshold employed in the Lease 14 transaction with Teck Cominco.
UTS and Teck Cominco now intend to complete an extensive core hole drilling program this upcoming winter, which will result in a drilling density sufficient to provide a contingent resource estimate by the end of 2008. We expect the drilling program to commence in January 2008 and to be completed by March 2008, subject to receiving appropriate regulatory approvals. -- www.cnxmarketlink.com
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