  WESTERN CANADIAN SEDIMENTARY BASIN
The potential for vast unconventional oil resources within the WCSB, combined with strong commodity pricing and advanced exploration and production technologies, have lead to a significant influx of equity capital to Western Canada.
The Western Canadian Sedimentary Basin ("WCSB") is a vast sedimentary basin underlying approximately 1.5 million square kilometres of Western Canada. The WCSB contains one of the world's largest reserves of oil and natural gas. It supplies much of the North American market. Characterized by tight formations, the WCSB contains numerous shale formations which encompass multiple rock types such as siltstone or sandstone.
The Colorado Group is a Cretaceous age stratigraphical unit within the WCSB, comprised primarily of shale, sandstone, conglomerate and siltstone. Within the Colorado Group there are several underexploited formations throughout southern/central Alberta and western/central Saskatchewan, with known hydrocarbons of light oil and natural gas.
Unconventional Oil
Conventional oil is defined as subsurface liquid hydrocarbons that flow naturally to the surface under the pressure of the reservoir using vertical wells or that can be pumped to the surface without being heated, diluted or stimulated. Unconventional hydrocarbons are produced using techniques other than traditional vertical well drilling methods. Unconventional oil currently accounts for less than 15% of the world's global oil production. However, as conventional oil production declines, unconventional oil is expected to supply more than 20% of global demand by 2025 (Wood Mackenzie, 2007). Tighter oil supply, demand growth, higher prices, energy security and advances in exploration and extraction technologies are driving the development of unconventional oil in North America.
Horizontal drilling is a technique involving an intentional horizontal deviation or 'kick out' from a vertical wellbore which permits contact and intersection with a larger portion of the reservoir than conventional vertical drilling. Horizontal drilling with multi-stage fracture stimulation completions ("multi-stage fracs") involves the pumping of sand and solvent at high pressure into the well and along the horizontal wellbore, cracking the oil-rich shale and sandstone, allowing the oil to flow out. Unconventional extraction technologies are associated with enhanced operational efficiencies including increased production rates, greater recovery of hydrocarbons and reduced drilling costs as one horizontal well can achieve gross production volume associated with up to 8 vertical wells (The International Resource Journal, 2009).
The WCSB, underlying most of Alberta, parts of Saskatchewan and Manitoba, the northeast corner of British Columbia and the southwest corner of the Northwest Territories, contains one of the world's largest reserves of oil and natural gas supplying approximately 25% of the North American market. The WCSB has an estimated 98 billion barrels ("Bbbl") of Original Oil in Place ("OOIP"), as calculated by conventional vertical well economics (Petroleum Technology Alliance of Canada, 2006). Of the 98 Bbbl of OOIP, approximately 77 Bbbl remain in place representing a recovery rate of 21%. Advances in extraction technologies such as horizontal drilling with multi-stage fracs, are facilitating the successful development of large reservoirs within the WCSB previously defined as unrecoverable using vertical drilling methods. Development of unconventional resources is expected to add oil to WCSB's in place numbers.
Characteristics of Unconventional Oil
The Company's land acquisition strategy is based on four fundamental geochemical and geological characteristics of shale believed to be essential for resource assessment and development: maturity of the organic matter; type of oil or gas generated and stored in the reservoir; total organic carbon content; and permeability of the reservoir. The geologic model used to define shale oil resources involves thermal maturity of the source rocks, the physical and chemical characteristics of the middle sandstone member and structural complexity of the basin. Permeability of shale and sandstone, a measure of the rock's ability to allow a liquid or gas to pass through it, is the most important parameter influencing sustainable unconventional oil and gas production. Total organic carbon ("TOC") is a fundamental attribute of oil and gas shale and is a measure of present-day organic richness. The TOC content, together with the thickness of organic shale and organic maturity, are key attributes in determining economic viability of an oil and gas shale play.
The presence of multiple rock types including untapped tighter rock in the Colorado Group's organic-rich shales suggests that there are multiple storage mechanisms with resources absorbed on organic matter and stored in micropores and macropores. Shale and sandstone serve a dual purpose as they both store and transmit resources desorbed from organic matter to the well bore. Sandstone acts as a conduit for oil migration through the shales. Determination of the permeability and porosity of the shale and sandstone formations, and the linking of those formations via hydraulic fractures to the well bore, are key requirements for economic development of unconventional oil and gas.
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