Deer Mountain

The Deer Mountain Unit #2 is part of the Judy Creek Swan Hills Complex. It is estimated that the complex has 7 billion barrel of oil in place covering over 24 townships of land.  The main portion of the reef was developed in the 1950\\\'s and 1960\\\'s, has been under waterflood and recovered over 40% of the oil in place.  The reef is now to be developed under C02 flood as announced by the Alberta Government as part of its $2 billion carbon capture and storage fund, through the Swan Hills Synfuels project. Because the Swan Hills pools hold such large volumes of original-oil-in-place, each percentage point increase in the overall recovery factor represents significant incremental production and reserves at low geological risk.

Arcan owns an 81% interest in Deer mountain Unit #2 (\\\"the Unit\\\").  Initial production from the Unit commenced in 1964 and it was unitized in 1984. Recovery from the Unit is low compared to offsetting pools in the field because of a historic lack of drilling and water injection.  To date, Arcan has drilled, or is in the process drilling 9 horizontal wells on the Unit - results will be published as they become available. As well, Arcan constructed a new oil battery in 2006 and 2007 which is capable of processing 4,000 barrels of fluid per day (expandible to approximately 8,000 per day for approximatly $1 million). On the Unit Arcan has no government production restrictions, has new centralized water injection facilities and is permitted to inject over fracture pressure. 

In December 2009, Arcan started drilling its first horizontal multi stage frac well in the Deer Mountain Unit.  Success on the first well could set up a very large inventory of horizontal wells on the 140+ net sections of land that Arcan has interests in the area.  To date, Arcan\\\'s Deer Mountain Unit #2 has recovered less than 10% of the oil in place.  Successful horizontal development would accelerate production and could increase recoveries up to 40%+.  Arcan plans to utilize its new battery and water injection facilities to maximize continued development and value of the majority of its lands. Arcan owns 100% interests in over 80 sections of land to the south and immediately offsetting the unit.   

The Future

Arcan has drilled its first round of 12 horizontal multi stage frac wells in the Unit.  Based on success, there could be an additional 15+ horizontal wells on the Unit with a potential 200+ horizontal wells on the adjacent lands. Arcan considers Deer Mountain to be a legacy asset which is expected to produce for another 15-20 years or more even after additional drilling and reserves growth. The new battery and the water handling facilities will allow Arcan to implement a field-wide waterflood and continue drilling horizontal production wells.

Arcan anticipates significant development opportunities based on results from a horizontal wells drilled on the Unit.  Development would be facilitated through the extension of our existing production and injection infrastructure.