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Derek Oil & Gas, Ivanhoe formalize LAK ranch development agreements

By OGJ editors

HOUSTON, Jan. 22 -- Derek Oil & Gas and Ivanhoe Energy Inc., both of Vancouver, have signed agreements for the joint development of LAK Ranch field, a horizontal well, thermal oil recovery project covering 7,500 acres in the Powder River basin in Weston County, Wyo.

LAK Ranch field is estimated to have 100 million bbl of oil in place, and Ivanhoe estimates that 30-70% may be recovered using thermal recovery techniques. Many fields elsewhere in the basin are producing from this formation.

Derek has completed two steam-assisted, gravity-drainage wells to 1,000 ft and 1,800 ft horizontally into the Newcastle Sand formation, which is Lower Cretaceous sandstone. Surface preparations are under way and steaming operations are expected to begin by early April.

The companies expect to drill five vertical steam-injection wells by summer, providing continuous steam application to the reservoir and increasing production volumes from the initial horizontal production well. Ivanhoe also plans a high-resolution 3D seismic data acquisition program to further identify the limits of the field.

The development program is expected to include additional horizontal production wells, new vertical or horizontal steam-injection wells, and surface facilities expansion. Ivanhoe estimates that the initial development program could grow to more than 20 wells producing more than 4,500 b/d. Optimum daily production rates could exceed 10,000 b/d the company said.

Ivanhoe, operator with a 30% working interest during the pilot phase, may double its working interest following the pilot by investing as much as $5 million (US) in initial development capital. Should Ivanhoe choose not to proceed beyond the pilot phase, Derek would become operator, and Ivanhoe's working interest would drop to 15%.

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