Montello Announces Potential Gas Discovery in John Bowen #2 Well, Re-Completion Plans for John Bowen #1 Well
Tuesday May 6, 9:00 am ET
CALGARY, ALBERTA--(Marketwire - May 6, 2008) - Montello Resources Ltd. (TSX VENTURE:MEO - News; "Montello") as Operator of the Morgan Highpoint Project is pleased to announce that the analysis and interpretation work has now been finished with respect to the cased hole logs that were recently run by Schlumberger on the John Bowen # 1 and #2 Wells.
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The John Bowen # 2 logs confirm that there is a potential gas zone at 8,275 feet in the Rome formation that has approximately 17 feet of interpreted net pay. This potential gas zone has never been produced in the State of Tennessee as no wells have been cased for production to this depth in Tennessee prior to Montello et al drilling the John Bowen #2 Well. The JV Partners are pleased to finally get confirmation that the logs on the John Bowen #2 Well confirm the presence of gas which is consistent with what was seen in samples as well as what was recorded on the gas detector at the 8,275 foot level when the well was drilling. Although it is premature to say what kind of reserves there may be attributable to the John Bowen #2 Well or what production rates may be achieved, we are anticipating that there may be significant pressures and flow rates encountered based upon how deep the zone is.
Montello is preparing a completion program for its partners to approve that includes perforating the potential gas bearing zone of interest and then stimulating it, depending on the flow rates that are achieved. Preliminary discussions have been held with field personnel with respect to delivering gas from the John Bowen #2 Well into Spectra's East Tennessee pipeline system that is located approximately 1 mile away from the John Bowen #2 Well. Montello has been informed that there is significant excess capacity available and that the pipeline is part of the main gas transmission system that runs across the United States. Montello views this potential gas discovery as the opening up of another play fairway for the Company and its partners in Tennessee which would complement the recently announced oil discovery in the Morgan Highpoint #3 Well.
Completion work on the oil zone identified on the logs in the John Bowen #2 Well, which is the same zone from which the Morgan Highpoint #3 Discovery Well is currently producing from, will be addressed after the completion work is conducted on the deep potential gas bearing zone at 8,275 feet.
In addition, now that the cased hole logs that were recently run by Schlumberger on the John Bowen #1 Well have been analyzed and interpreted, the JV Partnership is reviewing potential re-completion options in the fractured interval that was identified and never previously perforated. Prior to Montello having Schlumberger run the cased hole logs on this well, there were no modern logs available to analyze as to how best to re-complete the well. Based on the interpretation of the logs that Montello now has on both of the John Bowen Wells and the Morgan Highpoint #3, #4 and #5 Wells, it is believed that the John Bowen #1 and the other wells are in close proximity to a high pressure fracture regime. The Partnership is therefore reviewing directional drilling methods to better identify the fracturing in an effort to extract higher volumes that have been previously encountered in the area.
Montello is further pleased to announce that the Company is in the process of finalizing an arrangement with Blackrock Petroleum Corp. pursuant to which Blackrock Petroleum will carry Montello for a total of $1.25 million in future costs attributable to Montello's interest in the Morgan Highpoint Project, in exchange for being assigned a 15% interest in and to the John Bowen #1 and # 2 Wells along with the outright ownership of both a 15% interest, in and to the surface rights and mineral rights underlying the 110 acres comprising the Bowen Lands as well as a 15% interest in and to the lease applicable to the 50 acres which comprise the spacing unit for the John Bowen #2 deep well-bore, hereinafter collectively referred to as the "Bowen Assets". At such point in time as closing occurs, which is contemplated to occur within 14 days, ownership in and to the Bowen Assets will be 40% Montello, 40% Austin Developments Corp., 15% Blackrock Petroleum and 5% Park Place Energy Corp.
To avoid the potential for any competitive drainage issues amongst the JV Partners going forward, Montello and Austin have further agreed to grant to Blackrock Petroleum after the oil and gas zones identified on the John Bowen #1 & #2 Well logs have been tested, a right of first refusal to acquire at fair market value, based on a complete engineering evaluation, a further 5% interest from Montello and a 10% interest from Austin in and to the Bowen Assets where the ownership in the Bowen Assets could become Montello 35%, Austin 30%, Blackrock Petroleum 30%, and Park Place Energy 5%. The JV Partners have also agreed to enter into a 10 mile Area of Mutual Interest (AMI) outside of the Bowen Assets, where the participation rights will be Montello 35%, Austin 30%, Blackrock Petroleum 30%, and Park Place 5%.
Having a mechanism in place for there to eventually be common ownership throughout the Morgan Highpoint Project will be beneficial to all parties as any potential issues relating to the timing of drilling or completing wells or allocation of costs pertaining to the various land holdings and production facilities will be minimized. Avoiding the potential for any competitive drainage issues amongst the JV Partners going forward, was paramount to this agreement being reached at the JV Partners Meeting of April 11, 2008. The JV Partners are encouraged with results achieved to date on the Morgan Highpoint Project and look forward to announcing completion plans in due course.
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