Light Oil Assets
Goldstrike and Petro One Complete Business Combination March 1, 2016 – Goldstrike Resources Ltd. (TSX-V: GSR) and Petro One Energy Corp. (TSX-V: POP) announced on December 22, 2015 that they had entered into a definitive agreement providing for the acquisition by Goldstrike of all issued and outstanding shares of Petro One, to be carried out by way of a statutory arrangement involving Goldstrike, Petro One and the shareholders of Petro One (the “Arrangement”). On February 12, 2016 the companies announced that the Arrangement had been approved by the shareholders of Petro One and on February 15, 2016 the companies announced that the Arrangement had been approved by Order of the Supreme Court of British Columbia, which satisfied the final requirement for a statutory plan of arrangement under the Business Corporations Act (British Columbia). The Companies are now pleased to report that, with the consent of the TSX Venture Exchange, the Arrangement has completed with an Effective Date of February 29, 2016 and Petro One is now a wholly-owned subsidiary of Goldstrike.
Canadian Oil Assets in Manitoba and Saskatchewan
Petro One Energy’s focus is to acquire, discover & develop undervalued oil assets in Canada with close proximity to infrastructure and existing production. In 2015, the Company reduced its land holdings to 887 hectares (2,192 acres/3.4 sections, 9,034 acres/9.65 sections). The remaining leased lands are known as J1, J4 J5, and J10. All of the leases are targeting light oil at reservoir depths ranging from 740 to 1,700 metres. As of April 30, 2015, McDaniel and Associates Consultants Ltd. assigned Petro One property gross proved and probable reserves of 113,900 barrels of light /medium oil, including 17,000 barrels of proved developed producing reserves, 9,500 barrels of probable developed producing reserves, and 87,500 barrels of probable undeveloped reserves.
J5 Property, Milton, Saskatchewan
As noted above, Petro One’s J5 Milton property has current gross proved and probable reserves in the Viking (McDaniel and Associates Consultants Ltd., April 30, 2015).
Production from all wells on the Company’s J5 property at Milton, Saskatchewan between July 27, 2011 and July 31, 2015 was 22,323 bbl. Due to the worldwide glut of oil, all Petro One’s wells are uneconomic to produce at this time, and are currently suspended. The economics of reestablishing the production from these wells is to be reviewed when oil prices recover. Conversion of an existing well to water disposal and tying in the by-product gas to a pipeline that runs across the property are being considered as options that would improve the operating economics of these wells.
The Milton J5 property now covers three sections, two of which include all rights from surface to basement, and one covers all rights below the Viking. Most production to date has come from a highly porous and permeable conglomerate at the base of the Viking that runs east-west through Section 15. This reservoir is amenable to both horizontal and vertical drilling, and yielded a 3 month initial production rate of 82 bopd in the 10A-15-30-27W3 discovery well. This well has proved to be a steady and dependable producer, yielding over 17,000 barrels of oil in its first four years of operation, at an average rate of 20 barrels per day A horizontal well that was drilled outside the conglomerate trend from a surface location in 8-21-30-27W3 to a downhole location in 6-22-30-27W3 (1.3 kilometres north of the 10A-15 producer) successfully produced oil from a tight sand in the Upper Viking that is widespread in the area, but due to current economic conditions, this well had to be shut in along with the rest of the field.
As part of the J5 property, Petro One holds subsurface rights to one section with Bakken and Success potential that remains to be drilled.
J10 Prospect, Bromhead, Saskatchewan
In 2012, the Company signed a farmout and royalty agreement with ARC Resources Ltd. on its 100% controlled J10 property at Bromhead, Saskatchewan. By paying 100% of the drilling and completion costs, ARC earned a 100% before payout and 70% after payout interest in the Test Well Spacing Unit to the base of the Frobisher, subject to a 10% gross overriding royalty (the “GORR”) in favour of Petro One.
Having earned an interest in the southwest quarter of the Bromhead property by drilling the discovery well, ARC decided to drop its option on the remainder of the property, but indicated an intention to conduct additional drilling on its earned quarter in 2014, under the terms of the agreement, giving Petro One a 10% GORR on the additional wells, convertible at Petro One’s option to a 30% working interest after payout.
ARC’s earning well went on production December 28, 2012, with a three month average initial production of 110.3 barrels of oil per day (11 bopd for Petro One’s 10% GORR). Total production from the farmout well to January 31, 2016 was 3,4096m3 (25,763 bbl), with an average production rate of approximately 25 bopd over the life of the well.
On the remaining three quarters of the Bromhead property that is 100% owned by Petro One, seismic has indicated several more low risk horizontal development drilling locations close to the farmout discovery. These locations are amenable to cost-effective open hole completions, contingent on the recovery of oil prices.
The Company retains a carrying value of $579,464 on the J10 property.