49 North Resources Inc. provides an update on Allstar Energy Limited

TSX Venture Exchange Symbol FNR

SASKATOON, April 15, 2013 /CNW/ - 49 North Resources Inc. ("49 North" or the "Company") (TSXV: FNR), provides an update on the Riverside properties owned through Allstar Energy Limited ("Allstar"), a 100% owned subsidiary of 49 North.

Riverside

Over the past number of months, our existing re-completed wells (16-4 and 7-29) have presented a number of operational challenges producing from the lower Success formation, with heavy sediment production being the primary concern. Utilizing a number of different production techniques, many of the operational challenges have been met and the lower Success zone should prove to be very productive once water disposal and other field optimization is put in place.  With this better understanding of the lower Success zone the decision was then made to move up the wellbore and complete on the upper Success formation in the 16-4 well. Initial indications have shown that this upper zone may be a very close analogue to what other industry participants are producing from in the Mantario field to the north of Riverside. Additionally, the oil from the upper zone is of higher quality - 13.9 API as opposed to the 11.9 API experienced in the lower zone.

This has been a very encouraging development for the Company, as the production from the upper zone does not contain the gravels that are prevalent in the lower zone, and so far we have seen the water cut decrease dramatically to approximately 10%. During the 14 days prior to break up, the 16-4 well pumped at an optimized rate of 70 Bbls/d with a 5-10% water and sand cut from the upper zone.

In December of 2012, the Company commenced a six well drill program on the Riverside play with three wells in the vicinity of each of the two previous re-completed wells discussed above.  Completions on  2 wells (15-4 and 8-9) of the 6 well program commenced in January of 2013.  While these wells were initially completed in the lower most portion of the Success formation, producing from this zone proved technically and operationally challenging for the same reasons as the re-completed wells.  Given the difficulties, and the information garnered from our re-completed wells, the Company decided to move up in the wellbore to perforate and complete on the upper zone in the Success formation. A total of 15 m of the upper Success formation was perforated in the 15-4 well, with initial indications being very encouraging with good pump rates, along with  a large amount of sand being produced - a positive sign in the initial phase of production.  Initial 24 hour pump rates showed production to be about 120 Bbl/d with a 20% oil cut.  The final 48 hours of production testing showed the oil cut increasing to 80-90% with 5-10% sand at roughly 90 Bbls/d.  Following breakup the Company immediately plans on completing the upper zone on the second of the two new wells (8-9), as indications show that the same upper Success formation is present.

The third of six wells drilled at Riverside (11-3) was also perforated in the lower zone of the Success formation prior to break up.  Although no pump testing has been performed on the well, field operations have noted that during recent surface wellhead pressure monitoring, the well has now pushed oil to surface and additionally built 70 psi at the well head.  This is a substantial amount of pressure for this formation, pointing to a potential for an over pressured fracture system that has been perforated.  Although we do not know the percentage of oil versus water in the well bore it is very encouraging to see that the formation has enough pressure to push fluid to surface.

Due to the production difficulties initially encountered at the first two locations, it was decided not to equip this well or the remaining three new wells in the drilling program until we fully understand the optimal way to produce from this area.  Seismic data shows similar formations in the remaining well bores and production from these wells looks very prospective.

Prior to the onset of breakup, the Company had total field production of approximately 150 barrels per day from 16-4, 15-4 and 7-29.  All of the wells are currently shut in for breakup, as the trucks required to service the wells cannot access the well sites until the road bans are removed.  Once road bans are lifted, production will be restarted in 16-4, 15-4, and 7-29.  8-9 will be completed in the upper Success zone and the 11-3 well will be pump tested.  The remaining wells will be completed as production data and optimization techniques are garnered from work in the field. Once a local water disposal well is drilled the lower Success zone should be a substantial producer while the upper Success zone already appears to be very prolific with low water cuts based on initial production to date.  When commercial production has been sustained, our joint venture partner, Westcore Energy Ltd., will be entitled to some of the production from the new wells in accordance with the terms of the joint venture agreement (see Westcore news release dated July 25, 2012).

Netback and Comments on Recent WCSC Pricing and Differential Reversal

Based on the average WCSC (our benchmark) price of $55/Bbl experienced throughout the winter months, our netback on production was estimated at between $5-10/Bbl.  The extreme spread in the price differential that Western Canadian heavy oil producers have been receiving has greatly affected the economics of all heavy oil wells.  This pricing reality, along with the current lack of our own water disposal well and having to burn propane to heat our tanks, has drastically reduced netback, from the expected levels of $20-25/Bbl.  This situation has been reversing over the past quarter with WCSC now trading in excess of $80/Bbl. If sustained, this price improvement will have a significant positive effect on our returns once production is restarted after spring break-up.

Due to the very recent decline in produced water volumes and increase in WCS pricing, we expect that our netbacks will have improved to closer to $25-30/Bbl.  Not only does producing less water save on trucking and disposal costs, it also saves on propane costs with less fluid being heated in the storage tanks.

In 2012, the Company purchased a natural gas field along with the majority of the infrastructure and gas supply line necessary to run a short 1 km gas supply line off our main pipeline running through the property.  This gas will feed the  engines and tank heaters at each well location replacing the propane that we are currently purchasing.  During the winter months, the propane costs reach as high as $10,000 - $12,000 per location per month.  Using our own natural gas at these locations will increase netbacks experienced on average by $5-10/Bbl.

Correlation Between Seismic and Drill Results

Drill results at the Riverside play have validated what our 3D seismic program indicated; there is a very high porosity interval that lies at the bottom of the Success formation, directly on top of the Madison Unconformity.  Although porosity is upwards of 45-50% throughout the lower portion of the formation, matrix permeability is lower than experienced on our initial recompleted wells.

It appears that the reservoir is associated with a depression of the Madison Group Limestone at the unconformity which has allowed for accumulation space of the Success sediments. The reservoir consists of a quartz dominated chert/kaolinite breccia along with interbedded sands.  The oil appears to reside within the sands as well as within the brecciated fracture planes of the chert in the lower parts of the sequence.  The heart of the Success has in excess of 45m of total vertical accumulation with 3 major phases within it; Success A, Success B and Success C.  All three phases are oil bearing, with only the bottom phase, Success C being extensively tested to date.

The majority of the sand appears to be constrained to Success A, with Koalinitic and chert content increasing with depth into Success B and C.  This bodes well for the continued development of the field as we have only begun to now start to produce from the Success A in the 16-4 and 15-4 wells and will be planning to test the Success A in the 8-9 well after breakup.  Also, the stratigraphy that has now been drill tested in parts of the Riverside property has shown an extremely similar depositional setting to the prolific Mantario field to the north.

Based on current 3D seismic interpretation through the heart of the southwest portion of the Riverside play, this large accumulation of Success sediments covers over 2.5 square miles and is open in 3 directions based on current 3D seismic interpretations. Internal mapping based on the drilling and seismic to date has shown in excess of 25 drill targets (on 40 acre spacing) on the southwest portion of the property. This main target area will likely increase as we begin to drill the outer boundary of the seismic profile.

The seismic in the northeast part of the Riverside play showed a very similar depositional setting on top of the Madison unconformity.  Drill results indicated that, although not as prolific, a similar Success formation reservoir exists in the northeast portion of the Riverside lands.  Initial indications show an additional 10 targets (on 40 acre spacing) in the northeast based on seismic and drilling results to date.  This number is expected to grow significantly as more wells are drilled in the area.

Red Pheasant

In 2012 Allstar drilled 2 wellbores on the Red Pheasant property to test 2 areas that seismic indicated favourable.  The first drill target was into the Lloydminster channel sand that was encountered in the previous drilling program.  Seismic showed that the channel rose significantly to the north which indicated that the oil/water contact should be much lower in the sand column.  The 10-4 location was chosen as the structurally highest and thickest part of the seismic area.  Drilling confirmed the seismic anomaly with the Lloyd sands coming in a 12m thick zone with 10m of oil saturated sands on top.  The seismic program did not cover the northern extent of this Lloyd channel and future seismic programs are planned to further map this very prospective reservoir.  Following spring breakup, it is planned to perform a production test on the well to further evaluate the reservoir properties.

The second well was drilled directionally due to surface access restrictions on the SE portion of the property to target the known Sparky formation in a location where seismic showed a potentially better reservoir.  Drilling indicated the total Sparky formation to be a total of 10m of oil bearing sands, with the lower "Sparky B" having 3m of the best Sparky reservoir we have encountered to date.  On top of this, the wellbore also encountered a 2m thick Lloydminster sand that is oil saturated.  Both of these sands will be pump tested to further evaluate the production potential at these locations.

Due to the low prices that have been experienced by heavy oil producers over the past 6 months, the wells at Red Pheasant were suspended.  We will look to re-start the wells if the current pricing trend for heavy oil continues following break up.  It is expected that this will add 25-35bbl/day of oil to corporate production with the potential to add to this with completions of the two newly drilled wells.

The Red Pheasant lands consist of a 100% interest in Indian Oil and Gas Canada (IOGC) agreements covering roughly 20,319 acres.  The Red Pheasant IOGC lands have proven to contain Manville heavy oil that the Company has drilled a total of 8 wells into.  3D seismic at Red Pheasant has been interpreted and identified a promising well inventory.  Future programs will look to drill development wells into the seismic based locations that will help further expand the currently known reservoirs.

49 North is a Saskatchewan focused resource investment company with strategic operations in financial, managerial and geological advisory services and merchant banking. Our diversified portfolio of assets includes direct project involvement in the resource sector, as well as investments in shares and other securities of junior and intermediate mineral and oil and gas exploration companies. Additional information about 49 North is available at www.sedar.com.

Forward Looking Information: This release contains forward-looking information within the meaning of applicable Canadian securities legislation. In particular but without limitation, this press release includes references to discovered and undiscovered oil and natural gas resources and Allstar's future drill program. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resource. There is no certainty the drill program will be fully or partially completed. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking information, including the availability of adequate and secure sources of funding to complete, equip and bring the new well on-stream, prevailing commodity prices and the performance of 49 North personnel. In addition, the forward-looking information contained in this release is based upon what management believes to be reasonable assumptions. Readers are cautioned not to place undue reliance on forward-looking information as it is inherently uncertain and no assurance can be given that the expectations reflected in such information will prove to be correct. The forward-looking information in this release is made as of the date hereof and, except as required under applicable securities legislation, 49 North assumes no obligation to update or revise such information to reflect new events or circumstances.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE 49 North Resources Inc.