Deer Mountain

The Deer Mountain Unit #2 is part of the Judy Creek Swan Hills Complex. It is estimated that the complex has 18 billion barrel of oil in place making it one of the top 20 largest oil fields in the world, 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 fracture-simulated some existing oil wells and reworked existing water injection wells.  New vertical oil wells and one new water injection well have been drilled and Arcan shot approximately 34 square kilometers of 3D seismic covering the unit. As well, Arcan constructed a new oil battery capable of processing 4,000 barrels of fluid per day and a new centralized water injection facility. 

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 80+ 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 interests (30% - 100%) in over 60 sections of land to the south and immediately offsetting the unit.  Arcan drilled its first vertical well in October, 2008, its second vertical well in November 2009 and plans 2 - 3 more vertical wells on these lands by April 2010. 

The Future

Arcan is currently drilling its first horizontal multi stage frac well in the Unit.  Based on success, there could be an additional 20+ horizontal wells on the Unit with a potential 100+ 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 patterns of production wells and water injection wells for several years.

In addition to Arcan drilling 2 - 3 more vertical wells on its southern acreage by April 2010, Arcan anticipates significant development opportunities based on upcoming results from a horizontal well drilled on the Unit.  Development would be facilitated through the extension of our existing production and injection infrastructure.