San Leon has established connectivity between its two test wells in its Tarfaya Oil Shale project. Injection water has been observed in three wells, including pilot Well A and Well B drilled by the Company as part of the pilot project, and the pre-existing Star 12 core hole. Several transmissivity and static formation pressure tests were performed to identify the origin of the water which have confirmed connectivity between the two pilot test wells which are ~10 meters apart. Operations have been temporarily suspended pending continued technical analysis and forward operational planning.

Based on the test results, the Company has reached the following conclusions: •Well A, Well B and Star 12 are hydraulically connected through a permeable zone from 191.00 to 197.62 meters below ground level (mbGL); •Star 12 provided, over a long period, a flow path from the upper aquifer, feeding the permeable zone below 184.80 mbGL; •After cementation of the Star 12 well, the formation from 191.00 - 197.62 mbGL acted as a closed system with depletion related to formation water production (via airlifts); •The water samples suggest that the water from the deep permeable zone is similar to the shallow aquifer. The water contains primarily sodium chloride (78-91% of dissolved solids by weight), with small amounts of magnesium, calcium, potassium, sulfate and nitrate. •Despite establishing hydaulic connection between the two pilot wells, the Company has decided not to risk contaminating the shallow water aquifer. Further analysis will be performed prior to resuming operations either at the same location or at an alternative site.

Based on the recent results the Company will now identify an alternative drilling site away from existing wells to test the extent of the play and the associated water acquifers. Future wells will be cored and completed based upon the new information gained during this phase of the pilot project. In parallel, a hydrodynamic study of the basin is being contemplated to understand the regional aquifer systems in relation to the potential oil shale pay zones.

A permanent presence has been maintained at the site to ensure the security of the equipment and facilities installed to date.

The Company has been contacted by several companies with oil shale experience regarding partnering with San Leon on the Tarfaya Oil Shale project. A data-room is now open that includes geotechnical information as well as engineering designs for the pilot plant. The Company is in active discussions with interested parties.

Oisin Fanning, Chairman of San Leon, commented, "We are delighted to have confirmed natural connectivity between the wells. However, we have decided that San Leon should not be taking any environmental risk whilst we aim to continue to prove up the in situ extraction concept of the Tarfaya oil shale resources and to rapidly progress toward operations of the processing pilot plant designed and built for the project. Several firms have expressed a desire to partner with us in the project, confirming our belief that the Tarfaya oil shale resource development represents a significant opportunity as an unconventional play."

Tags: San Leon Energy