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Gold/Mining/Energy : DALTON RESOURCES DAL:ASE -- Ignore unavailable to you. Want to Upgrade?

To: Pluto who wrote (429)	9/18/1998 1:44:00 PM
From: m.l. van oirschot	Respond to of 486

Friday, Sep 18 1998 11:45AM ET *NEWS RELEASE** Strachan prospect discovery First Star Energy Ltd FST Shares issued 24,016,195 Sep 17 close $0.59 Fri 18 Sept 98 News Release Mr. John Squarek reports First Star and its partners have made the first significant Swan Hills/Beaverhill Lake natural gas discovery between the Caroline and Blackstone-Hanlan area in the foothills of Alberta. The Strachan 2-22-38-09W5 well (formerly 3-22) (First Star 20 percent BPO, 25 percent APO) encountered 14 metres of porous dolomitized reef in the Swan Hills formation during drilling operations in April. During the summer months the well was acid stimulated and initial production testing of the Swan Hills has now been completed. During the production test the well flowed at raw gas rates up to 10 mmcfd with negligible water production. The final test rate was 4.8 mmcfd on a 5/16 inch choke, and a wellhead flowing pressure of 2375 psig. Survey and permitting for the tie-in of the well to the Strachan gas plant will begin shortly, with an expected onstream date of Jan. 1, 1999. First Star previously reported (Stockwatch April 20, 1998), that this well did not encounter the Leduc D-3 formation which was the primary target at this location. However, the well has encountered a new natural gas reservoir in the Swan Hills formation. The revised geological and geophysical interpretation for the prospect area, which takes into account information from the well, suggests that the Swan Hills formation was not drilled in the optimal position. Whereas the well location was originally moved to match the 3-D seismic and optimize the expected structure (Leduc D-3), it was not the optimum location for a Swan Hills well. Therefore, the option blocks originally designated in the farm-out agreement relative to the D-3 target do not necessarily correlate to the Swan Hills discovery. The farm-in partners have elected not to drill the first option well on the option block specified, although it is expected that the first development well for the Swan Hills will be drilled in early 1999. Further drilling, both development and exploration, will be required to determine the full extent of the discovery. Based on the penetration rates, gas detector reading and well logs, a number of shallower zones, including the Mississippian and Lower Mannville formations, appear to contain hydrocarbons in the 2-22 well. No tests of these potential zones were carried out during the drilling operations (in order to protect the integrity of the wellbore). A shallow well, to access these reserves, is expected to be drilled in late 1998 or early 1999. First Star's original acreage block, prior to the drilling of the discovery well, consisted of 16.5 sections of P&NG rights, (10,560 gross acres). Including the Sept. 16, 1998 sale, First Star now has rights varying from 25 per cent to 100 per cent in a total of 34 sections (21,760 gross acres) or 7430 net acres for an average working interest of 34.2 per cent on this play. (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com

To: Pluto who wrote (429)	9/18/1998 9:11:00 PM
From: StockJock-e	Read Replies (2) \| Respond to of 486

Here are the numbers from Grayhairs: " Assuming that you will allow some estimates, as follows, I will illustrate one approach to answering your question: Proven Deep Reserves = 46 BCF x 1 section = 46 BCF. Proven Shallow Reserves = 14 BCF x 1 section = 14 BCF. Probable additional Deep Reserve = 46 BCF x 3 sections = 138 BCF. Probable additional Shallow Reserve = 14 BCF x 3 sections = 42 BCF. Potential additional Reserves = ??????? Value of Gas (in the ground) = $0.75/mcf Probable gas is risked at 50%. Payout Capital Account = $6 MM. TKE Interest BPO = 10, APO = 30 FST Interest BPO = 20, APO = 25 DAL Interest BPO = 15, APO = 7.5 LEY Interest BPO = 10, APO = 5 Then, the Gross value of the Proven & Probable Reserve is $0.75 x 60 plus $0.75 x 0.5 x 180 or $45MM + $67MM = $112MM. If we ignore the value of the royalty interests during the payout period, then the value to the parties is: TKE=.10 x $6MM + .30x($112MM - $6MM) = $32.4MM/11.8MM = $2.75/share FST=.20 x $6MM + .25x($112MM - $6MM) = $27.7MM/26.4MM = $1.05/share DAL=.15 x $6MM + .075x($112MM - $6MM)= $8.85MM/22.6MM = $0.39/share LEY=.10 x $6MM + .05x($112MM - $6MM) = $5.9MM/8.6MM = $0.69/share IMPORTANT FOOTNOTES: -- By virtue of its ~50%(??) ownership of LEY, the Strachan play is worth an additional 0.5 x $5.9 MM or ~$3.0MM to TKE (i.e. an additional $0.25/share). -- The calculations herein ignore the value of all other assets and liabilities. They simply present my estimate of the current value of the Strachan discovery to the parties. As an example, if TKE's Meekwap and other assets are worth $1.25/share, then with this Strachan discovery the shares should be worth $1.25 + $2.75 + $0.25 = $4.25/share. -- Some may argue that the "interests" vary in other lands and they do. But, the interests in the reserves to be produced by the 3-22 (2-22) well are as set out above. Until lands of other interests are developed, the above interests must be used to "carve up" the values. Hope that the above is of some value to you. Another approach to evaluating the worth involves generating production forecasts and then estimating the present value of the net revenue stream. That requires many additional assumptions and takes a lot of "grinding". I do not believe the end result would be any more reliable at this stage of development. Later, grayhairs "