Transeuro Energy Corp. - Canada

Canada

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Transeuro acquired 100% interest in the Beaver River in June 2011. The lease covers 35 sections of the Liard Basin including the structural anticline known as the Beaver River field. It includes and the entire infrastructure of 3 producing wells, 7 wells not in production, the production equipment gathering system and tie in point to the East Coast main export gas pipeline that runs onto the lease.

Development Strategy

Transeuro's strategy in the Liard Basin is to pursue the significant gas potential in all 4 horizons gas producing horizons: including the deeper conventional Nahanni formation that was discovered in the 1960's, the deeper shales that are analogous to the shales producing in the adjacent Horn River basin, and the shallower shales and conventional intervals that are currently producing in the A-2 and A-7 wells. The prospectivity of the area has been emphasised by land sales in recent years and by interest in the 2011 land sales as seen in the attached regional map.

The Beaver River natural gas field is located in the Liard Basin in Northern British Columbia and was discovered by Amoco in 1961 with commercial production beginning in 1971 from the deeper Nahanni reservoirs that are also producing from the adjacent Fort Liard area of the southern Northwest Territories where large gas discoveries by Chevron and Encana have confirmed the region's natural gas potential. The Nahanni is historically estimated to contain 1.5-3.0 Tcf original gas in place, with a recovery factor of 10-20%. The Property is situated approximately 150 km northwest of Fort Nelson, the Beaver River field ties into the West Coast transmission pipeline.

The field has a series of shale formations over a total thickness of 2500m that are all thought to contain producible gas columns, the Mattson, Besa River and Golata/Muskwa shales. There are 3 wells on production. The Mattson is currently producing in well A-7, the Besa River from well A-2 and the deeper Golata/Muskwa shale from the A-5 well. 8 old wells exist in the field from the original Nahanni development and these are being reviewed for cheap workover operations to access more of the prospective shale intervals.

Testing of the B3, August 2007

Shale gas at Beaver River

Transeuro has identified the potential for a significant enhanced shale gas play in the shallow sections of the field, in 3 distinct horizons and has started a multi-well program to appraise the size and commercial viability of the resource:

Mattson shale from around 1200 - 2100m with A-7 producing
Besa River Shale from around 2000 - 3000m with A-2 producing
Golata and Muskwa shales from 3000m - 4000m

The initial phase of the Beaver River farm in commitments was completed during the winter of 2005/06. Re-entry and perforating operations were conducted in three old wells, the A-2, A-6 and B-2. Wells A-2 and A-6 were successfully re-completed to the Mattson formation and hydraulically fractured to stimulate production. Well A-2 has been on production since March 2006 with gas rates peaking at 4.5 million cubic feet per day (MMcf/d). Well A-6 produced successfully at around 0.5 MMcf/d prior to fracturing but following a small fracturing operation, has struggled to clean up sufficiently to flow at commercial rates. A larger slickwater fracturing operation is planned. Operations on well B-2 were suspended due to poor cement isolation between casing and the wellbore was retained for a future deep sidetrack into the Nahanni.

The first shallow well, the A-7, was drilled in the north of the field to target the same intervals producing successfully in the A-2 well. Following drilling and mechanical problems the well failed to reach the target and was completed and fractured in the Mattson formation. The well is currently on production and indicates the further potential for horizontal fracced wells in these shallower sections.
A second shallow well, the B-3, was drilled logged and cased by the end of March 2007. Different small hydraulic fracturing methods were used and obtain gas from all 4 intervals, but not at commercial rates. Larger slickwater fracs are now planned to achieve commercial rates.

In September 2008 the company re-entered the A-5 well, abandoned the Nahanni and perforated and stimulated in the Golata/Muskwa shales. A thin limestone interval was acidized and tested 10 mmcf/d with a wellhead pressure of 3000 psi. The well was put on production and flowed steadily at 5mmcf/d and is performing more as a conventional well than a typical shale gas well. As the pressure declines it is hoped that the limestone will act as a pathway for the surrounding shale gas to produce into the well at a commercial rate although water production is a risk in these deeper horizons.

Shale Gas in British Columbia

Substantial evidence exists to suggest that the shallow shows at Beaver River are in fact due to the presence of a substantial shale gas reservoir. The pursuit of shale gas fields in northeast British Columbia has seen a huge increase in activity during 2007, particularly in the Horn River basin, located just to the East of Beaver River. The same Muskwa shales there are present in Beaver River as the deeper of the 3 potential horizons and were the target of the A-5 workover in September 2008. Transeuro has 3 vertical wells on production at Beaver River from intervals within the shales and is looking to extend the shale appraisal program by drilling the first horizontal wells in the most attractive intervals. The export pipeline is located on the lease allowing for extended testing of the shales.

The reservoirs are being characterised by Transeuro as an 'enhanced' shale gas prospect as the presence of sand and clays in the shale increases the porosity to the range of 4-7%, somewhat higher than conventional shale gas plays, thereby allowing for a greater gas saturation. Additionally, the field is located in the foothills of the Rockies, in a region of historically high rock stresses that have generated a high density of natural fractures in the shales. These natural fractures are essential in shale reservoirs to increase the overall permeability in the rock that allows the gas to flow towards the wells. The higher density of fractures suggests that the wells will flow at a higher rate and will drain a larger area around the wellbore. Overall cumulative recovery of gas in place should also be enhanced.

Shale Appraisal Campaign

Results from the initial campaign of workovers and new drills has provided mixed success, which is not unusual in the development of shale reservoirs. A review of the fracturing technology has been completed and the next phase of appraisal will target up to 14 horizons in 6 wells across the field, to assess the commercial potential of all 3 horizons across the field.

Nahanni infill locations and new exploration targets

Transeuro has completed a fully-integrated reservoir study of the deeper Nahanni reservoir to identify possible infill locations and new exploration targets for bypassed gas production. Advanced special core analysis has been completed to provide accurate detailed capillary pressure and relative permeability data as well as fracture and matrix interaction. Seven possible infill and step-out well locations have already been identified. A dual porosity reservoir simulation model will be used to assess the potential of each location and the risked economics of new wells.

In early 2008 the A-8 well was completed into the Nahanni formation, targeting an area of the reservoir that was thought to be an isolated fault compartment. Well results show that the area was not isolated and had been affected by the production from adjacent wells. 3 intervals were identified in the Nahanni and the top interval was tested, but produced mostly water and some gas. The lower 2 intervals remain to be tested and are expected to flow dry gas.