announcement drilling outback area

HIGHLIGHTS
• Elk’s Outback acreage acquisition programme completed in the Powder River Basin, Wyoming with
22,409 acres purchased
• An Outback JV formed with Paladin Energy Corporation of Dallas, Texas taking a 25% interest in 17,496
acres
• The Outback JV is to drill the Wilson#41-29 well to test the high-potential Outback play concept of shallow Lance Formation gas-bearing sandstones, as well as a deeper oil targets in the Teapot and Parkman Sandstones
• Wilson#41-29 expected to spud Friday 11th July and take 7 days to drill to 3800’ (1158m)
BACKGROUND
Elk Petroleum Limited (ASX: ELK) first indicated in February 2007 that it was undertaking lease acquisition in northern
Wyoming targeting regional exploration play concepts, particularly those adjacent to historic oil fields. Elk’s exploration philosophy has been to expose the Company to in-house generated prospects that are low cost, yet high reward. Without identifying a specific location or play concept, acreage acquisition had progressed to 10,000 acres by June 2007, 14,000 acres by late October 2007 and over 20,000 acres by late November 2007. By this time, the Outback play area was identified and the play concept (developed from the interpretation of shallow Lance Formation untested gas sands in Elk’s Ash Creek oil field) revealed. Subsequently a small amount of additional acreage has been acquired taking the total to 22,409 acres and the locations for the first 2 wells have been selected and staked, and drilling approval has been received for the first of these.
The interpretation of gas in the shallow Upper Cretaceous age Lance Formation reservoirs at the Ash Creek structures to the east of Outback is based on conventional electric log analysis; this is most evident by high resistivity values in wells which are structurally high and much lower resistivity values in off-structure wells. Unfortunately, none of the wells in the Ash Creek fields can test this interpretation due to the way that the wells were originally drilled and cased when developing the much deeper Shannon Sandstone oil reservoirs; the nearest Lance Formation production is 130 miles to the south at Cave Gulch Field where the Lance reserves are over 300 bcf. Three of the four largest gas developments in the State of Wyoming in the last 15 years have been in the Lance Formation; these developments have booked many trillions of cubic feet (Tcf) of gas reserves. The Elk exploration approach has been to identify those areas regionally where these high-resistivity sandstones are best developed and are thickest; Figure 1 shows a regional isopach (thickness) map of these and in particular focuses attention to the west of Ash Creek into the Outback area where up to 250’ (76 m) of Lance Formation reservoirs are predicted to be present. There are only 4 wells drilled in the 1950s providing well control and there is no seismic data in this sparsely explored area.
UPDATE
The last part of Elk’s exploration acreage strategy for Outback has been to seek a Joint Venture (JV) partner in the play to recover a significant part of the land acquisition and drilling costs; this has been achieved by the recent execution of agreements with Paladin Energy Corporation of Dallas, Texas for a 25% interest in 17,496 acres of the Outback play area and an agreement to set up an Area of Mutual Interest (AMI) with Paladin covering this area as well as an adjoining area immediately to the north in Montana.
The Outback Joint Venture will drill the Wilson #41-29 well to test both the Lance Formation as well as the deeper Teapot and Parkman Sandstone oil targets (Figure 2) ; Elk will have a 75% working interest and a 64.75% Net Revenue Interest in this well. The well location has been selected adjacent to where a water well, drilled in 1951, blew out gas and mud from a formation predicted to be shallower than the Lance Formation, thereby demonstrating the existence of an active petroleum system. The surface conductor has been set and the well is scheduled to spud on Friday 10th July and take 7 days to drill to a Total Depth of 3800’ (1158m). The Lance Formation top is expected at 1200’ (366 m) and the Parkman top at 3550’ (1082 m).
The Managing Director of the Company, Andy Rigg said “This is a very exciting time for the Company to be drilling a
wildcat well testing a brand new exploration concept which has been developed based on some excellent geotechnical
work extrapolated away from the Company’s 100% owned Ash Creek field. The exploration concept has extremely large
unrisked potential, but there is no cost effective way of de-risking this concept any further other than to drill a well. We welcome Paladin Energy joining with Elk in this project.”