Cold Production

Strata Oil has been evaluating the potential for cold production on its Cadotte West project, as a result of recent findings in our Cadotte West Resource Evaluation. Cold production in the Peace River oil sands region has become a focus of several developers, particularly Baytex Energy's operations to the southwest. The area also hosts several cold production wells on the leases of other producers including Shell, Husky and Murphy Oil. In all cases, production is from the Bluesky Formation which is one of the oil-bearing units that is widely distributed on our Cadotte West project.

We've identified several cold flow drill targets on our western land holdings.

Cold heavy oil production is a technique for producing heavy oil where sand is extracted with the oil and then pumped to the surface using conventional techniques. This method has been demonstrated to be suitable for 5-20m zones, which is consistent with Strata's Cadotte West project where the Net Thickness of the Bluesky/Gething ore zone ranges from approximately 10m to 20m. This is a non-thermal means of oil production which is currently in use across Canada (where the technology has been developed).

Strata Oil has conducted geological and seismic analysis of its Cadotte West project to determine whether the conditions are suitable for cold production of heavy oil. In specific we've looked at the different physical properties and technical aspects related to the identification of pools and fields on our Cadotte West project which may be analogues to Baytex Energy's Reno field, where the total thickness of the Bluesky Formation at Reno ranges from 20m to 25m and that sequence includes two or three sand beds of about 5m thickness each separated by shale units that prevent communication between each sand bed. Any one of these sand beds may be the oil production units from one place to the next and at Reno the main production one that has been developed so far is the lower sand. This is partly because that bed is the cleanest and thickest but it also has the fluid properties that allow the oil to flow unaided.

Strata Oil has confirmed Cadotte West has characteristics which are favorable to host cold production

Although the available drilling data at Cadotte West is limited, drilling to the southwest of our lease block indicates that the Bluesky Formation has important similarities to that at Reno.

Specifically the data indicates that:

Like at Reno, the Bluesky Formation is 20m to 25m thick, which is the target thickness for potential drill sites.
Also similar to Reno, there are two or three sand beds of 5m or more thickness each separated by shale units, with the lowest one being the cleanest.
The shale beds are of thickness similar to those within the Reno field.

Strata Oil's objective is to develop its cold-production opportunities at Cadotte West

This is a cold production facility in Peace River.
The tanks store the heavy oil as it's pumped to the surface.

Also, interpretation of the geological structure on Strata's Cadotte West lands suggests that there may be structural traps that have the potential to be suitable for the accumulation of oil at saturation levels associated with commercial development.

In addition, the results of the seismic data analysis confirmed the presence and nature of a geological structure where thicker Bluesky to the southwest meets thinner Bluesky to the northeast. The data confirmed that the change from thin to thick occurs quite abruptly, confirming the presence of the anticipated geological structure on our Cadotte West lands and showing the location where this occurs, and defined the nature of the structure at a level that is sufficient to potentially identify prospects and plays in the Bluesky formation on our lease block.

Our technical analysis has showed that Reno-type characteristics, possibly suitable for the application of cold production, may be located in our Cadotte West land holdings. It remains to be confirmed by drill-testing whether oil in the Bluesky Formation at Cadotte West has the fluid properties that permit the use of Cold Production methods.

This information may contain forward-looking statements about our exploration, production, and other operating and financial plans. These statements are not guarantees of future performance, involve certain risks, uncertainties, and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Among the factors that could cause actual outcomes and results to differ materially are changes in petroleum prices; changes in refining and marketing margins; potential failure to achieve, and potential delays in achieving, expected reserve or production levels from existing and future oil and gas development projects due to operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas; unsuccessful exploratory drilling activities; unexpected delays or difficulties in constructing company facilities; general domestic and international economic and political conditions; the ability to meet government regulations; potential disruption or interruption of the Company's facilities due to accidents or political events and other matters detailed in our publicly available filings with the Securities and Exchange Commission. Cautionary Note: As an oil and gas company, in our filings with the SEC we only disclose proved reserves that have been demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. However, in the information presented here, we may use certain terms such as "probable reserves", "potential net recoverable reserves", "barrels of oil", "in-place", "resource", and "recoverable reserves" that we do not include in our filings with the SEC.