Guatemala

[Tackler]

Guatemala License A-2-92
Guatemala License A-2-92, owned by TrueStar Petroleum and governed by a production-sharing contract, encompasses 554,000 acres located in the Peten Basin along the Mexico-Guatemala border. The license area is located along the boundary of the Mexico- Guatemala thrustbelt and the southern Peten Basin.

Successful wells are located to the east, west and north of the license area. In addition, the San Diego #1, within the license area, was drilled off-structure in 1981 to a deep exploration target on one of several interpreted, mapped anticlinal closures. This well briefly produced in excess of 145,000 bbl of oil from the shallower Coban Formation. The Proved Undeveloped Reserves from the Coban were never developed on-structure as Hispanoil, the operator, exited the country. It is estimated that the San Diego structure alone may contain 5m to 25Mboe potential. In addition, TrueStar Petroleum believes there is excellent exploration and exploitation potential on the remaining interpreted, untested structures, of which there are at least three within the seismic coverage area.

Over the past 6 years, TrueStar Petroleum has studied data from satellite photographs, surface geological work and from a review of existing extensive seismic data from the government of Guatemala. The Company's exploration database also includes the interpretation of radar and Landsat images. During 1998 and 1999, 1,200 line-miles of modern, 2D seismic data were acquired at a cost of approximately US$3.5m.

The new data, coupled with the previously acquired 1,025 line-kilometres of seismic, were processed and interpreted to further delineate the aerial extent of the San Diego structure and other known structures, including the large Goliath structure, located in the foothills of the Candelaria Mountain range.

The Goliath structure is a large sub-surface anticline, with surface expression, and was first identified by Landsat and later confirmed by aerial photography and side-scanning radar. This structure hosts beds that are believed to be analogous to those producing in adjoining fields.

Prospects for productive drilling are enhanced by the fact that the Goliath is among the shallowest in the South Peten Basin. The reserve potential for Goliath is difficult to assess statistically but could easily eclipse San Diego, due to the larger interpreted aerial extent, and be in the 50m to 100m barrel range.

Development Strategy
TrueStar Petroleum intends to exploit the potential of its Guatemalan asset through a low risk strategy where it leverages on the resources of a larger partner. It is currently speaking to several US independent oil companies with a view to negotiating an agreement whereby it takes a 10% working interest, and a 40% carried interest in 2 wells. There is anticipated to be no difficulty in getting rigs and oil field services from Southern Mexico into the targeted area. The estimated cost for a 10,000 foot well is US$3m.

The forecasts on which TrueStar Petroleum has based its strategy for Guatemala envisage a participation of 50%. There is currently a 20% royalty, and with production up to 20,000boe per day, the state has right to a 34.1% participate, and the option to increase it up to 70%, provided it pays its share of the capital expenditure. Legislation is being contemplated, however, to cap this at 35%. An adjustment for royalties have been made, and average well recovery have been assumed. In 3 years TrueStar Petroleum expects to drill 4 to 6 wells, and over 5 years it anticipates that it will drill 12 wells. In terms of potential exploration targets, TrueStar Petroleum has already delineated 4 closed Coban structures.