MegaWest’s interest in the project consists of approximately, 34,000 acres in Edwards County, Texas. Pursuant to earn-in agreements the Company may earn up to a 66.67 percent working interest in all leased acreage. Included in the total undeveloped acreage are 20,600 acres in which we have already earned a 50 percent working interest and 13,400 acres in which we have earned a 12.5 percent working interest, and have completed the majority of the work to increase this earning to 33.33 percent.
To date, MegaWest commenced an exploration drilling program with the goal to drill indentified prospects and validate the Company’s geological model. To date, seven wells have been drilled and results are currently being analyzed. This new data is being consolidated into an updated geological model.
Historic Information:
MegaWest, through its wholly-owned subsidiary MegaWest Energy USA Corp. (“MegaWest USA”) has acquired all of the issued and outstanding membership units of Trinity Sands Energy LLC, a Delaware limited liability company (“TSE”) for a consideration of $200,000 USD plus the issuance of 95,000 Exchange Shares of MegaWest USA; each Exchange Share may be exchanged for $10 USD cash or 100 common shares of MegaWest during the period January 1, 2008 to July 31, 2008. The assets of TSE consist of a 50% working interest in 14,948 net mineral acres in Edwards County, Texas and an Earn-In Agreement to increase said working interest to 66.67%; Earn-In Agreements whereby TSE may earn up to a 66.67% working interest in an additional 13,348 net mineral acres in Edwards County; and 7.5 million common shares of Energy Finders, Inc.
Three areas have been identified as being highly prospective for the production of oil from the Trinity Sands. Traveling from east to west, the sub-project areas are Lula, Rocksprings and NW Edwards, which together make up the Trinity Sands Project.
Since 1969, companies such as Shell, Getty, Murphy Oil, Dorchester and Carmel Energy have drilled and cored wells to quantify the heavy oil resource and have tested steam recovery in this project area. The well data encouraged further drilling and testing, but the then existing economic conditions did not support commercial development. There are also references to primary oil production from one of the wells.
In 1986 Meteor Developments Inc. undertook a technical study of the Rocksprings area and prepared a commercial development plan based on steamflood technology. Meteor’s plan included the construction of an 80,000 barrels of oil per day oil treating facility. However, the development timing conflicted with the downturn in oil prices in the mid and late 1980’s.
MegaWest Energy believes that thermal technology developments of the past 20 years (primarily in the Canadian heavy oil industry) combined with current oil prices may now provide the basis for commercial development.
Two formations in this area are oil bearing - the Paluxy Lime (average depth of 500 ft.) and the Trinity Sands (average depth of 1,000 ft.). These horizons on MegaWest Energy’s lands are extensive.
The majority of the data for the Trinity Sand formation comes from wells drilled en route to the deeper gas formations. Electrolog and core analyses demonstrate oil in the Trinity Sand formation throughout the area, but no commercial production has been established to date. Aggregate sand sections vary from 40 to 140 feet in thickness.
The rock varies from fine-grained sand to gravel and has no “unfriendly” clays, which would interfere with steam recovery. The data show the oil in the formation to have an average saturation of 64% of 9° to 16° API gravity. Permeability varies from 500 millidarcies to as much as 10 Darcies with an average value of about 5 Darcies. The sands are high porosity averaging 32%. These reservoir characteristics indicate a rich deposit with oil in place of over 1600 barrels per acre-foot as represented by the core data. This data is quoted as general information and is not NI 51-101 compliant.
In addition, the Marble Falls limestone has produced 500 MMCF since 1957 from two wells drilled to a 70-foot porous limestone at a depth of 4,200 feet, which is known as the Lula sub-project and is on MegaWest Energy lands. Five miles east, a reef-like limestone of over 180 feet thickness at a depth of 4,700 feet has been intersected and may extend over 4,000 acres. One of the core wells to be drilled will test the Marble Falls limestone for gas. This gas can be utilized as fuel for steam generators or sold into the local gas pipeline grid.
MegaWest Energy has completed a full geological study of the Trinity Sands Project. This includes compilation and evaluation of all available data, the conversion of all available logs to digital form, well curve editing and correction after digitizing, and the organization of well logs and all historical drilling, completion and core data into a structured database.
MegaWest Energy may start thermal stimulations for cyclical steam operations on the best well for each of Lula and Rocksprings. This will include, purchase or lease portable steam generation and surface production equipment sufficient to conduct pilot cyclical steaming operations for each well.
Production from the Trinity Sands via steamflood has been modeled and indicates that 55 - 60% of the oil in place should be recoverable with this technology. Due to reservoir heterogeneities, field results can differ from model predictions. The best analogs for this project are steam tests that have been conducted in California, having similar reservoir characteristics, where recoveries have approached 50% of the developed oil in place.