Osum Expands its Position in the Grosmont Carbonates – Total Corporate Contingent Resource Base increases by 36%

Posted: May. 12, 2011     Author: Osum Oil Sands Corp

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Calgary Alberta – May 12, 2011. Osum Oil Sands Corp. (“Osum” or the “Company”), a private pure play in-situ oil sands developer, announced today that it has acquired a total of 51 sections (32,640 acres) of oil sands leases in the Saleski Grosmont carbonate region. The new leases, located within townships 85 and 86, ranges 20 and 21, are contiguous to Osum’s existing carbonate holdings complementing the previous 100% owned Saleski land and the Company’s joint venture lands.

Osum’s total Grosmont carbonate holdings, including the newly acquired leases, are pictured here. Additional imagery is available here.

GLJ Petroleum Consultants (“GLJ”) was engaged as an independent qualified reserve evaluator to evaluate the new leases in accordance with National Instrument 51-101 (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGEH”). GLJ also evaluated all four of Osum’s other existing project areas: Taiga (Cold Lake), Saleski JV, Saleski 100% and Liege as part of the December 31, 2010 reserve and resource assessment.

The new lease area will be referred to as “Saleski West” and consequently the land previously named “Saleski 100%” will now be referred to as “Saleski East”. Reserves and resources included in this press release are stated on a working interest basis.

Highlights:

  • GLJ has assigned 870 million barrels of best estimate contingent resources (P50) to Saleski West, which includes Grosmont C & D horizons and Ireton. This represents a 36% increase in Osum’s best estimate contingent resources bringing the corporate total to 3,258 million barrels, plus 360 million barrels of proved plus probable (2P) reserves.
  • GLJ estimates that the contingent resources at Saleski West could support total production of 80,000 bbls/day which increases Osum’s total long-term sustained production potential from its reserve and resource base by 30% to 350,000 bbls/day.
  • With the addition of Saleski West the aggregate 8% pre-tax net present value of Osum’s best estimate contingent resources has increased by $4,204 million (39%) to $15,026 million as assessed by GLJ using January 1, 2011 pricing. The 8% pre-tax net present value of Osum’s 2P reserves is $2,056 million.

Steve Spence, Osum’s President & CEO, commented, “We are very pleased with this strategic acquisition and what it adds to our already substantial inventory of development opportunities. The contiguous nature of our substantial land position in the Saleski Grosmont carbonate trend will allow for integrated development and expansion of commercial projects well into our future.”

Osum continues to drive forward on its existing holdings in the Grosmont carbonate play at Saleski. A SAGD pilot project on the joint venture lands in Saleski began operations in December 2010. The results from this pilot are expected to provide valuable insights into how to best develop the Grosmont carbonate resource, which can be applied across all of Osum’s carbonate assets. Work towards commercializing the Company’s 100% acreage in the region is also ongoing with an extensive 19 well core program completed this past winter in Saleski East.

In the Company’s other core area in Cold Lake, a commercial application and Environmental Impact Assessment was filed for the 35,000 barrel per day Taiga Project in December 2009 and Osum is targeting regulatory approval in 2011. First oil from the Taiga Project is anticipated in 2014.
This new acquisition, together with recent crown land acquisitions contiguous to Saleski East, brings Osum’s total land holdings in the Saleski region to approximately 6 1/2 gross townships (124,032 net acres) of contiguous land plus 34 sections (21,920 net acres) in the Cold Lake region.
A detailed pro forma breakdown of Osum’s total reserves, resources, and net asset values as assessed by GLJ as of February, 2011 including those at Saleski West is provided below:

ALL REFERENCES TO THE FEBRUARY 2011 GLJ ASSESSMENT REFLECT THE JANUARY 2011 GLJ ASSESSMENT FOR THE COMPANY’S RESERVE AND RESOURCE BASE AT THAT DATE, PLUS A FEBRUARY 2011 GLJ ASSESSMENT OF A PROPERTY ACQUIRED BY OSUM IN FEBRUARY 2011 – ALL USING THE GLJ JANUARY 2011 PRICE FORECAST.

The reserve and resource estimates herein were extracted from reports prepared by GLJ, an independent professional petroleum engineering firm, in accordance with Canadian Securities Administrators’ National Instrument 51-101 (NI 51-101) and the Canadian Oil and Gas Evaluation Handbook.

Under NI 51-101, proved reserves are those reserves which can be estimated with a high degree of certainty to be recoverable. It is 90 percent likely that actual remaining quantities will exceed estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of proved plus probable reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is only a 10 percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. Contingent Resources are further classified in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status. Resource estimates are described as follows: Best Estimate – This is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.; High Estimate – This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate. Low estimate – this is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, the term reflects a P90 confidence level.

Contingent resources were assigned in regions with lower core-hole drilling density than the reserve regions and are outside current areas of application for development. These resource estimates are not classified as reserves at this time, pending further reservoir delineation, project application, facility and reservoir design work. Contingent resources entail commercial risk not applicable to reserves, which have not been included in the net present valuation. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.

About Osum
Osum is a privately held Alberta based company focused on the application of environmentally responsible in situ recovery technologies within Canada’s oil sands and carbonates. Additional information on the Company is available at osum2015.wpengine.com.

Cautionary Information and Forward Looking Statements
Certain statements contained in this press release may contain projections and “forward-looking statements” within the meaning of that phrase under Canadian and U.S. securities laws. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions may be used to identify forward-looking statements. Those statements reflect our current views with respect to future events or conditions, including prospective results of operations, financial position, predictions of future actions or plans or strategies.

Certain material factors and assumptions were applied in drawing our conclusions and making those forward-looking statements. By their nature, those statements reflect management’s current views, beliefs and assumptions and are subject to certain risks, uncertainties, known and unknown, and assumptions, including, without limitation, machinery development or production delays, changing environmental and other regulations, the ability to attract and retain business partners, the ability to exploit hydrocarbon resources with our technology, the need to obtain and maintain proprietary rights over our technology, competition from other technologies, the ability to access the capital required for project development, research, technology development, operations and marketing, the need to generate positive cash flow in the foreseeable future, changes in energy prices and currency levels.

Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying our projections or forward-looking statements prove incorrect, our actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated, or expected. We do not intend and do not assume any obligation to update these forward-looking statements whether as a result of new information, plans, events or otherwise.

Our securities are not traded on any stock exchange and thus, Osum is not subject to regulation by any Canadian stock exchange. Osum is not a reporting issuer in Canada and its securities are not registered under the United States Securities Act of 1933. As a result, we are not presently subject to the reporting, certification or other requirements imposed on Canadian Reporting Issuers or U.S. registered issuers under, among other things, applicable Canadian securities legislation or the U.S. Sarbanes-Oxley Act of 2002 (“SOX”).

This release is provided for information purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the common shares in any jurisdiction (including the United States) in which such offer, solicitation or sale would be unlawful.

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FOR FURTHER INFORMATION PLEASE CONTACT:

Osum Oil Sands Corp.
Justin Robinson
Manager, Communications
jrobinson@osumcorp.com

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