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

To: Garry R. who wrote (470)	4/22/1999 10:30:00 AM
From: Scotchman	Read Replies (1) \| Respond to of 486

Here's an excerpt from Dalton's Annual Report. Dalton Annual Report April 21 1999 The Strachan project began in late 1997 with Dalton farming into an eight-section land package of First Star and Tusk. By February 1998, when the first Strachan well at 2-22-38-9W5 started drilling, the Strachan project had grown to sixteen and one half sections with Apache Canada becoming operator. The primary target was the Leduc (D-3) formation with secondary horizons in the Mannville, Elkton, and Swan Hills. In April, intermediate casing was set below the Elkton formation and a press release was made indicating that gas had been discovered in the Mannville formation. Continued drilling found no reserves in the Leduc formation, but gas was discovered in a dolomitized reef section in the Swan Hills formation. The partners in the well group decided to place a tight hole status on the project upon confirmation of the Swan Hills discovery. The intent of the tight hole status was to acquire, in a meticulous manner, all available open crown P&NG leases, which may be along the drilling trend for the Swan Hills. The land acquisition process took until mid September to post and buy the open crown lands. During the right hole period an initial completion was performed on the Strachan 2-22-38-9W5 well to prove gas production form the Swan Hills. The partners also agreed over the summer months to perform additional acidization work on the Swan Hills, which was completed by early September. A public announcement was made regarding the Swan Hills gas discovery on September 18, 1998 after the last required crown land sale. The 2-22-38-9W5 Swan Hills well sill be tied into the Gulf Midstream Strachan gas plant located four miles to the south. Pipeline routes and AEUB pipeline applications have been made with commencement of construction to start shortly. Initial production rates are expected to be 5-6 million cubic feet per day (mmcfd) of gas from the Swan Hills formation. A twin well located at 4-22-38-9W5 will be drilled to produce the shallower Mannville discovery. The second well is required since the sour Swan Hills gas cannot be produced in the same well as the sweet Mannville gas. The second location is to commence drilling immediately after spring break-up and will take approximately 30 days to drill. Upon completion, we estimate the Mannville well will produce 3-5 mmcfd plus 10 bbls/mmcf natural gas liquids. We anticipate having both the Swan Hills gas and the Mannville gas producing by July of 1999. Dalton currently holds an interest in 23 sections of land in this area (see map) of which our working interest varies between 7.5-30 percent in all of the deep rights and various shallow rights. Due primarily to the current conditions of the oil and gas business, the joint venture partners of Strachan have decided to farm-out its deep rights to another industry player. We have met with several interested parties concerning this play and are anticipating a seismic/drilling option deal to be completed by the second quarter of 1999. Additional shallow drilling opportunities will arise at Strachan and we will decide on our level of participation based on technical risk and available capital.