Groundstar Resources Limited.

Asset Information

South America:

Guyana: Takutu Basin PPL

Figure 9:
Guyana Country Map - On March 11, 2008 Groundstar obtained a Farm-in partner, Canacol Energy Ltd., for the Takutu Basin.

The fiscal terms for the Farm-in Agreement obligated the Farmee to pay 100% of all exploration expenses for the first US$ 12 million to earn an undivided 55% working interest in the block. The Corporation completed community consultation and environmental impact management studies and fulfilled its commitment in drilling Takutu Oil & Gas Apoteri K-2 on the Karanambo Prospect. It has also completed construction of the staging area for the Rewa Prospect.

Figure 11
Figure 9
In May 2009, it was announced that Canacol would acquire an additional 35% working interest in the Petroleum Prospecting Licence (PPL) in the Takutu Basin in exchange for a cash payment to Groundstar of US$ 3.45 million. Canacol's net working interest in the PPL increased to 90%; Groundstar's net interest was reduced to 10% which is carried by Canacol to first commercial production. Groundstar was to remain operator of the block through to the completion of the Apoteri K-2 well, after which Canacol has the right to apply to the Guyana Government to become operator for the project.

Under the terms of a new (May 22, 2009) 3 year Petroleum Agreement with the Guyana Geology and Mines Commission the operator is obliged to drill two exploration wells by May 22, 2011. Due to the results of the K-2 well and logistics issues Takutu Oil & Gas (subsidiary of Groundstar Resources) requested the GGMC for an extension for beginning drilling the second well in Q1, 2012.

Figure 12
Figure 10
Figure 10:
Takutu Basin: Groundstar PPL, Seismic Grid, Wells and Prospects - Home Oil and Hunt Oil acquired 2,576 kilometers of high quality 2D seismic in the Guyana portion of the Takutu Basin. Five prospects were originally mapped by Groundstar based on this seismic. They were named Karanambo, Rewa A, B, C and Pirara River. The Apoteri K-2 well was located on the Karanambo structure on the Northern Savannah Arch. Three of the remaining prospects are in the Rewa area near the northeastern margin of the rift basin, and one is on the Northern Savannah Arch to the south of Karanambo-1 and Apoteri K-2.

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Figure 11
Figure 11:
Rewa Prospects A, B and C prognosed to drill to total depths of approximately 1,000 to 1,400 meters. Conventional Jurassic sandstone is the primary reservoir objective in normal fault blocks. Secondary fractured reservoir objectives could occur in the Manari Fm. and Apoteri Volcanics in all three prospects. Rewa A and B prospects consist of two separate fault blocks with a combined area of potential structural closure of 225 square kilometers at the Top Apoteri Volcanics. Seismic data suggests that sandstone reservoirs could be present in the Lower Jurassic Manari and Pirara formations above the basalt.

Rewa C is about 28 square kilometers in area at the Top Pirara Fm. with conventional sandstone primary reservoir objectives in the Middle to Upper Jurassic Pirara and Basal Takutu formations. This structure has the thickest interval containing potential reservoir sandstones among the three Rewa prospects.

The Pirara River Prospect is located on the Northern Savannah Arch 12 kilometers south of Apoteri K-2. The primary objective is shallow sandstones in the Takutu and Upper Pirara formations. The three-way dip closure is bordered to the south by a regional fault. The area of closure is 15 square kilometers at the Top Pirara Fm. The Manari-Apoteri section would be a secondary objective.

Drilling results: The Corporation, through its subsidiary, spudded Takutu Oil and Gas et al Apoteri K-2 on December 31, 2010 and announced the rig release on April 30, 2011. The deviated well was located 600 meters from the Karanambo-1 oil discovery made by Home Oil in 1982. The original K-2 wellbore penetrated the Top Apoteri Volcanics 293 meters shallow to prognosis due to crossing a fault that had not been recognized on seismic prior to drilling. The well was sidetracked (K-2 ST1) at 2414 meters to a total measured depth of 2991 meters (2842 meters TVD), and after four drillstem tests was subsequently plugged and abandoned.

Apoteri K-2 penetrated a vertical thickness of 421 meters of Apoteri Volcanics. Common spotty live oil staining and occasional dull yellow fluorescence were observed in cuttings in the Basal Manari shale and Apoteri Volcanics between 2490 and 2900 meters. Also, C1-C5 gas readings were consistently recorded in the Lower Pirara Formation and Manari-Apoteri sections. A significant lost circulation zone was penetrated at 2976 meters MD, and drilling stopped shortly thereafter. Live oil shows and locally elevated C1-C5 gas readings indicated that a substantial part of the Apoteri Volcanics was in a potential oil productive zone except that anticipated fracturing was not developed. Most of the fractures interpreted on the Formation Micro Image log (FMI) had been cemented by calcium carbonate or were induced by drilling.

DST #1 was a misrun after which three successful, barefoot open hole drillstem tests were conducted before the well was abandoned. DST #2 (2445-2571 meters) crossed a zone that had oil shows in the samples and mud but recovered only 46.6 meters of drilling mud from an impermeable Manari shale and Apoteri basalt sequence. DST #3 (2654-2800 meters) was conducted over a section containing elevated C1-C5 gas readings. However, it recovered only 73 meters of drilling mud from a very low permeability basalt interval containing thinly bedded clastics. DST #4 (2897-2991 meters) recovered 2308 meters of formation water containing 84,900 ppm chlorides. The water came from a nearby high permeability aquifer in contact with the lost circulation zone encountered at 2976 meters. Pressure-depth plots indicated that a permeability barrier, likely a fault, exists between the K-1 and K-2 wells.

The disappointing results from Apoteri K-2 has downgraded but not condemned the fracture play in the basin. The Karanambo-1 discovery flowed at a rate of 411 bopd from fractures near the Top Apoteri. The high fluid flow rate in Apoteri K-2 (3875 bwpd) from fractures 400 meters below the Top Apoteri shows that the volcanics still could form a potentially productive oil reservoir elsewhere in the basin.

Currently, Groundstar and its partners are re-evaluating the seismic and well data to determine the location of the second commitment well in the basin.

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