Application of Technology - Unlocking the Potential of the Bakken

The Bakken play was known to exist in southeast Saskatchewan for many years, however, the oil was not generally considered economically recoverable until recent advances in horizontal drilling opened up the play, in combination with the application of a new completion technology pioneered by Petrobank. The royalty holiday incentives introduced by the Saskatchewan government encouraged industry to assume the risk of drilling and completing these expensive horizontal wells. This long-term vision accelerated the activity levels required to unlock the potential of the play and is continuing to generate record drilling intensity and land sale bonuses in southeast Saskatchewan.

Long horizontal wells provide maximum exposure to the reservoir, and new completion techniques allow fracturing of the siltstone along the full extent of the horizontal wellbore. Initial results yielded improved production rates but exhibited steep declines and the preliminary forecasted reserve recovery was in the range of six to nine percent of original oil-in-place.

In late 2006, we focused on deploying technologies to improve production rates and enhance recoveries. Through the use of an existing fracture stimulation technology, but modifying its application, we achieved production results that exceeded expectations by a wide margin. This approach involves sequential fracturing in isolated high quality portions of the reservoir and allows improved concentration and containment of the frac within the formation. Previous frac techniques frequently went out of zone causing an immediate influx of water from surrounding formations leading to a rapid decline in oil rates and ultimate recoveries. Many of our new wells now produce at initial rates in excess of 250 bopd and average about 90 bopd over the first year. Our reserve evaluator currently estimates that with the new completion technique, recovery rates will now be between 10 and 15 percent of oil-in-place, which has increased the recoverable reserves by up to 240,000 barrels of oil per section of land. Petrobank continues to use this significant improvement in the economics of the play to our competitive advantage.