In 2006 Aurora reached agreement to acquire an interest in the North Belridge Oil Field, which has estimated potential P50 reserves of 60 million barrels of recoverable oil and 40 billion cubic feet of gas. The field is located in the prolific onshore San Joaquin basin of California, USA and is operated by Texas Crude Energy Inc (TCEI).

Aurora has the opportunity to earn a 32.5% interest in the first ten wells (24.375% Net Revenue Interest) until individual well payback and then 16.25% after payout by paying 32.5% on the first five wells and 24.375% on the next five wells. The Operator’s estimate of potential recoverable reserves from the initial 10 development wells is approximately 6 million barrels of oil.

Aurora has participated in the drilling of two wells to date; NB26-1H and NB26-2H.

Following the completion of the initial 10 well appraisal and development drilling program, Aurora has the option to acquire a 7.5% working interest in the balance of the Project for the payment of US$1 million and to participate on a 1:1 basis thereafter in respect of that interest. (Aurora would maintain its 16.25% interest in the initial 10 wells).

Background
The North Shafter oil field is located near the North Belridge discovery and is geologically very similar. The producing North Shafter Field is regarded as one of the most significant discoveries in the basin since the early 1970’s. It was discovered in 1982 but the discovery well was plugged as non commercial due to low flow rates from the unusual high porosity, low permeability reservoir. From 1992 to 1997 Texas Crude and partners experimented with drilling and completion techniques and found a way to commercially develop the field using horizontal wells and fracture stimulation. At North Shafter, average productivity per well is about 400,000 barrels of oil and 0.5 BCF of gas from a single zone about 35 feet thick.

The North Shafter field and North Belridge discovery both occur in stratigraphic traps in cherty layers within the Tertiary age Monterey Shale Formation. The traps are unusual in that they are formed by diagenetic alteration of tiny fossil diatoms. Diatoms are siliceous and are altered to chert by pressure and temperature at increasing depths of burial as the sedimentary basin is filled. Under certain conditions, this alteration or diagenesis forms a stratigraphic trap for petroleum by generating a reservoir zone of porous chert within otherwise tight diatomaceous shale.

The petroleum filled reservoirs have seismic properties which enable them to be seen as amplitude anomalies on seismic sections. This property is advantageous for the exploration for and development of this type of field. For example at North Shafter the seismic amplitude anomaly has been a near perfect predictor of the 60 productive wells drilled to date.

These reservoirs although having relatively high porosity, are low permeability so that conventional vertical wells usually do not produce and wells do not flow naturally. The current successful commercial development of these fields requires drilling long horizontal legs within the reservoir, followed by fracture stimulations to crack the reservoir open around the well bore, thereby increasing flow rates.

North Belridge Discovery
The North Belridge discovery is a potential 108 MMBO recoverable stratigraphic trap at a depth of 9800 feet in the Monterey Shale Formation in the southern part of the San Joaquin Basin. The discovery is approximately 3,500 acres in area and is defined by three wells and a seismic amplitude anomaly that is similar to that seen within the nearby North Shafter Field.

At the analogous North Shafter field 60 productive wells have been drilled with average recoverable reserves per well of 400,000 barrels of oil, (a range of 200,000 barrels to 1 million barrels). The pay at North Shafter is about 35 feet thick. The North Belridge discovery found production at the same horizon that produces at North Shafter however; the North Belridge reservoir is much thicker with three individual reservoir zones with a total of 170 feet of potential pay.

This first horizontal well in the North Belridge Oil Discovery NB26-1H has been shut-in pending further development of the field. Flow testing of this well resulted in an approximately 92% water cut, well above the expected 50% water cut obtained from testing of the equivalent zone in the discovery well. The conclusion is that the fracture stimulation undertaken penetrated the underlying water zone, despite being specifically designed not to do so and as a result the well would only produce oil at a rate significantly below the expected 500 BOPD. On the positive side, the vertical pilot hole drilled approximately 180 feet of log interpreted oil pay and the horizontal well has confirmed recoverable oil over the almost 5,000 feet horizontal length of the well, which increases confidence in the reserve potential of the discovery.

The second development well, designated NB26-2H, is located close to the discovery well 23-1 and NB26-1H well.

NB26-2H was drilled vertically before kicking off directionally and drilled horizontally along the selected reservoir interval at about 9,975 feet for about 4000 feet, then cased and completed for production. Fracture stimulation of the well resulted in a daily flow rate of 45 barrels of oil and 500 barrels of mostly formation water during testing.

Like NB26-1H, the most likely explanation for the high water cut is that the fracture stimulation undertaken penetrated the underlying high permeability water zone.

Aurora and the project operator TCEI are considering alternative plans for fracture stimulation of the North Belridge oil field.