DBRM

The East Slopes Projects

Kern County, California

Daybreak Oil and Gas, Inc. and its partners initiated an exploration project in the southern part of the San Joaquin Basin in California in 2005. At the time there was not a lot of exploration activity but large efforts then and since have been made to develop secondary and tertiary recovery schemes in old fields.  However it was apparent there was little modern exploration activity.  Multiple prospect areas were identified and Daybreak leased approximately 22,000 undeveloped acres in those areas with its partners. On July 12, 2007, Daybreak announced that a seismic option farmout agreement had been signed between Chevron U.S.A. Inc., (“Chevron”) and Daybreak and its partners, covering an Area of Mutual Interest (AMI) in Kern County, California. This agreement provided for a seismic program over both the Chevron and Daybreak partnered lands. The seismic was shot in October and November 2007 by Chevron who has thereby earned a 50% interest in the Daybreak and partner lands. Daybreak has an option that by paying 50% of the costs of drilling the first four wells, Daybreak will have earned a twenty five percent 25% interest in 3,000 acres of the leasehold contributed by Chevron to the AMI. The 33 square mile 3-D high definition survey was the first modern data acquisition over the survey area. Drilling targets are highly porous and permeable sandstone reservoirs containing 15° API to 25° API crude oils at depths of 1,200 feet to 3,500 feet, and are therefore relatively inexpensive to drill. 

 

Mapping and delineation of the first nine prospect portfolio will be completed by the beginning of July 2008.  Four initial drilling locations, requiring Chevron review, have been selected and are currently being studied by Chevron exploration staff. Drilling could commence on the selected prospects as early as August 2008, subject to rig availability and government approvals.  After drilling and completion of the first four wells Chevron, has the option to operate the wells drilled on the AMI lands. The produced crude oil will be sold to Chevron at posted market prices, which in California are close to world oil price for all grades of crude oil.  

 

East Slopes “Expanded AMI” Project,
Tulare County, California

In a separate project area to the Kern County East Slopes area, where we are participating in a joint venture with Chevron U.S.A., Inc., Daybreak and its partners have leased approximately 9,000 acres. Three prospect areas have been identified in the south eastern part of the San Joaquin Basin and we are continuing to lease lands in those areas. The San Joaquin Basin is a very prolific oil producing area that has a long history of production. In the vicinity of the proposed work area, two prominent fields have produced 435.5 and 20.6 million barrels respectively from the Pyramid Hills and Vedder Sands. Production in the region is typically from shallow depths (1000-3000 feet) and the oil is of low to medium gravity (13-20 API). Daybreak has a 50% working interest in this project.