Len Burchell and John R

TSX Venture Symbol: DIG
February 1, 2006
FUTURE Projects
Digger Resources Inc. (“DIG” or the “Company”) sees its High Definition Reservoir
Geochemistry (“HDRG”) technology as an innovative, powerful and cost effective
exploration tool to assist with exploration for new hydrocarbon reserves, especially in
support of the developing Mackenzie Valley gas pipeline system. Due to the high cost
of drilling in the Mackenzie Delta and elsewhere in northern Canada, including the
Beaufort Sea, and with 3D seismic in excess of $45,000 km2 oil and gas operators are
looking for new exploration tools. As earlier reported DIG has already completed
sizeable HDRG sampling programs in the Mackenzie Delta, Yukon and northern British
Columbia for a major oil and gas explorer. The goal of these surveys was to template
oil and gas accumulations in the area to see if there was a significant geochemical
signal at surface. The lands chosen for the surveys were covered by extensive 3D
seismic and numerous wells that defined the subsurface distribution and hydrocarbon
distribution. The results from these HDRG surveys matched in all respects the
subsurface hydrocarbon distribution. The outcome of these surveys has positioned
DIG’s HDRG technology as a primary exploration tool to be used by participating
companies for oil and gas exploration in Northern Canada and other frontier areas.
DIG is still in the process of facilitating HDRG orientation surveys over existing oil and
gas fields in the Beaufort Sea. HDRG survey samples are to be collected from the
seabed by a research vessel operated under the auspices of several Federal
Government Research Departments. The purpose of this survey is to initially
“fingerprint” the HDRG response over proven fields, such as Amauligak with
700,000,000 boe, and then subsequently utilize the technology to verify the
hydrocarbon prospectivity of existing, un-drilled seismic targets as well as the
development of new targets based solely on HDRG technology. This exercise will test
HDRG technology and hopefully confirm its ability to generate geochemical anomalies
from offshore hydrocarbon accumulations. The results of this survey will form the basis
of a subsequent announcement by DIG.
DIG is currently structuring a joint venture agreement with a major oil and gas explorer
whereby DIG will earn an interest in future production from a multi-well drilling program
to be located by HDRG surveys on freehold acreage owned by the oil and gas
explorer. DIG has undertaken and completed an extensive road allowance survey and
HDRG orientation studies over known producing wells and dry holes proximate to this
acreage. The results gleaned from these surveys will allow the HDRG technology to
effectively ‘fingerprint’ the geochemical responses associated with these hydrocarbon
accumulations. This ‘multi-species fingerprint’ will then be used for locating and
defining drill targets on the freehold acreage. The terms of the agreement, when
executed, will form the basis of a future announcement by DIG.
12 Sierra Morena Way S.W.
Calgary, Alberta T3H 3E4
Tel: 403 290-1913 Fax: 403 261-7015
As earlier reported DIG advised that the application of DIG’s High Definition Reservoir
HDRG technology in the Suffield District, southwestern Saskatchewan has resulted in
the discovery of two commercial oil wells for Green Dragon Investment Ltd (“Green
Dragon”), a Calgary based investment company. Both Green Dragon wells were
located and drilled solely on the basis of an HDRG geochemical anomaly. Neither of the
drilling targets was supported by any seismic or geological information / interpretation
available to Green Dragon.
Development Well 4-13-14-19W3M (“4-13”)
The 4-13-14-19W3M development well drilled by Green Dragon in September 2002
has a production capability of plus 150 BOPD after intersecting Roseray sands in a 50
year old reservoir at a depth of 3500 feet. By comparison the current production history
of surrounding Roseray producing wells is in the 40 – 50 BOPD range. An older
production well drilled in the 1950’s, the 2-13-14-19W3M well that is located 700m east
of the Green Dragon 4-13 well, is still capable of producing 20 BOPD and has
historically produced in excess of 800,000 barrels of oil. Based on seismic
interpretation a third party drilled the 3-13-14-19W3M well, located 300m east of Green
Dragons 4-13 well, in January 2002. This position was thought to be up-dip of the
older 2-13-14-19W3M producing well. This interpretation, based on seismic
interpretation alone, proved incorrect with the 3-13-14-19W3M well intersecting the
target stratigraphy down dip and the well was subsequently non-economic to produce.
Green Dragon drilled its successful 4-13 well based solely on the HDRG response
from surface soil samples.
Exploration Well 3-1-14-19W3M (“3-1”)
The 3-1-14-19W3M vertical exploration oil well, located 3 km southeast of Green
Dragon’s 4-13 development well, was drilled by Green Dragon in late September 2005
and completed as an oil well in October 2005. Due to production problems resultant
from a 20 tonne sand frac to stimulate the Lower Shaunavon Formation, the more
conventional and accepted practice is to use an acid frac to stimulate production, and
because of the time and remediable actions required to try and reverse the negative
impact caused by the sand frac the 3-1 well has only just recently been able to
produce from the Lower Shaunavon zone on a consistent basis. The frac may have
gone through to the water leg of the reservoir thereby giving the 3-1 well a much
higher-water cut and lower production rate than would have been associated with the
more conventional acid frac. Over 30 operational days the 3-1 well produced
approximately 10 BOPD with an average water-cut of 90% from this zone. Green
Dragon is hopeful that with continuous production from this zone that the oil-cut will
stabilize at a higher rate. A zone in the Upper Shaunavon Formation has been
evaluated and just completed. The oil produced from the Upper Shaunavon and Lower
Shaunavon Formations will be commingled. Green Dragon plans to monitor and
analyze the performance from these two zones for plus 30 days before completing the
prospective uphole Roseray zone. Green Dragon has also advised DIG that two other
targets identified by HDRG sampling on its P&NG leases will now be drill tested in
early 2006 subject to regulatory approval and rig availability. The results from this
drilling program will form the basis of a future announcement by DIG.
The Green Dragon HDRG anomalies were consistent with characteristic patterns
observed over known oil fields in the Suffield District and DIG’s HDRG technology again
confirmed its ability to precisely define an anomaly related to hydrocarbon
12 Sierra Morena Way S.W.
Calgary, Alberta T3H 3E4
Tel: 403 290-1913 Fax: 403 261-7015
accumulations that, for reasons of reservoir thickness and geological contrast, previous
seismic programs were unable to resolve. Work in the Suffield District suggests that the
highest HDRG responses at surface appear to be reflecting the zones of maximum
hydrocarbon accumulation that correspond to ‘stratigraphic high’s’ thereby identifying
the optimum target position for a well to be located.
The focus of DIG’s HDRG program of work over the last number of years has been to
develop a rapid cost effective exploration technique, as an adjunct to existing seismic
methods, through the detection of metallic and non-metallic ions in near surface soil
profiles. The presence of various metallic and non-metallic ions forming geochemical
signatures directly above oil and gas accumulations has been well documented by
industry. In the past it has been difficult to measure these anomalies both accurately
and with a high degree of repeatability, which has severely hampered its applicability
and value for hydrocarbon exploration.
Research directed and subsequently published by DIG’s strategic partner, MMI
Technology (“MMI”), into metal ion geochemistry during the last 15 years has seen the
successful global acceptance and application of this technology to mineral exploration
for buried base and precious metal deposits. DIG entered into a licensing agreement,
effective July 5, 1999, which provides exclusivity to DIG of MMI’s Mobile Ion
Geochemistry HDRG leach and its global application to hydrocarbon exploration.
The work completed by DIG has shown that the application of its proprietary
metallic/non-metallic ion deep penetrating geochemistry has successfully addressed
the previous problems in applying soil geochemical techniques when exploring for oil
and gas reserves. DIG’s technology is based on the collection and analysis of near
surface soil samples using a proprietary leachant and ultra low-level Inductively
Coupled Plasma (“ICP”) analyses. Over the last 5 plus years DIG has completed
upwards of 15 orientation surveys over existing oil and gas fields using DIG’s
technology and have in all of these surveys found a sharp anomaly, over background,
residing vertically over the oil and gas accumulations and a completely flat response
over the dry wells in the same area. These anomalies were consistent with patterns
characteristic with the oil traps discovered in the 3-1-14-19W3M and 4-13-14-19W3M
Green Dragon wells.
Some of the key benefits offered by HDRG technology are summarized hereafter:
The HDRG survey generates direct hydrocarbon anomalies rather than a series
of structural traps of unknown fluid composition;
HDRG orientation studies over known hydrocarbon accumulations permits the
technology to effectively ‘fingerprint’ the geochemical responses associated with
these accumulations. This ‘multi-species fingerprint’ can then be used for the
assessment of companies’ seismic and drill targets as well as extensions to existing
oil and gas fields;
HDRG is a robust exploration tool not subject to the variations of previous
geochemical techniques that have produced inconsistent and unreliable results to
date. A typical HDRG survey can involve the analysis of over 21 individual species
or elements. This multi-element data is then presented as PSI (Petroleum
Significance Indicator) maps for interpretation;
12 Sierra Morena Way S.W.
Calgary, Alberta T3H 3E4
Tel: 403 290-1913 Fax: 403 261-7015
An HDRG survey produces a highly detailed PSI map of the hydrocarbon
accumulation. It can prove invaluable in the locating of both vertical and horizontal
wells as well as the planning and implementation of secondary recovery processes
such as water injection;
HDRG surveys do not require any form of approval process, with the exception
of the approval by the surface landowner, and accordingly the surveys can be
completed quickly and confidentially and there is no need to share the results with a
third party mineral title holder. This process allows for a creative land evaluation
process that effectively permits one to quickly assess the potential offered in a
particular area before any decision is made regarding land acquisition;
HDRG has demonstrated the ability to detect anomalies from hydrocarbon
accumulations that, for reasons of reservoir thickness and geological contrast, are
beneath the ability of seismic to resolve.
The Company believes that its HDRG technology has the potential to offer a significant
technological advance in the search for new oil and gas reserves both in new and
mature fields.
Digger Resources Inc.
Signed / "Norman B. Yeo"
Norman B. Yeo, President, CEO
For further information, please contact [email protected] or:
Norman B. Yeo @ Phone: 403-290-1913 Fax: 403 261-7015
12 Sierra Morena Way S.W.
Calgary, Alberta T3H 3E4
Tel: 403 290-1913 Fax: 403 261-7015