SER.L Regulatory News (SER)

13 Jun 2008 10:00



SEFTON RESOURCES INC.

OPERATIONS UPDATE

Sefton Resources Inc., the AIM listed oil and gas production company with assets in California and Kansas, announces an update through its wholly owned subsidiary TEG Oil and Gas Inc. (TEG) regarding the Tapia 2008 Q1 Drilling and Pilot Steam Programme.

TAPIA FIELD

Cyclic Steaming Pilot Programme.

The Yule #7 well has been on production since late April, 2008 following a one week steam and a three week thermal soak cycle as part of the Pilot Steam Programme. The results thus far are encouraging. The well prior to steam injection was producing at an average rate of approximately 15 BOPD. The well has since been producing at a rate of 15-25 BOPD, an increase in oil production. 

A larger pump capable of producing greater fluid volumes was installed on 6 June 2008 and this is now being monitored to see if there will be further improvement in oil production. 

Steam injection has been completed on The Yule #10 well and it is currently in a two week "soak" period.

The well was steamed for one day using lease gas from the Snow #1 well to fire the steam generator. Subsequently, fine-grained sand produced with the gas forced a shut-in of the well after the first day of steaming. After working on the well for a few days, it was decided to finish the Pilot study with propane.

The mechanical problems encountered with gas production from the Snow#1 and Yule#8 wells as a source of fuel for the steam generator were not unusual and require further engineering work to utilise lease gas for steaming. The Board remains confident that the gas in this shallow reservoir can be used effectively as fuel for the generator. 

Evaluation of Yule#7 and Yule#10  test results will provide the necessary data for the planning of a standard steam injection programme for the field going forward.

Results From Wells Recently Drilled.

Total May, 2008 Tapia production was 5588 BO and total Eureka production was 238 BO for a combined total of 5826 BO or 188 BOPD. The cash flow from our production stream will be greater than $500,000 for this month and the anticipated continuation of this level of cash flow will support the ongoing development programme of the company's assets.

 The three Snow wells #3, #4 and #5 are now producing into the rebuilt Lackie/Snow Tank Facility that previously only handled production from the Lackie Lease. The wells began producing on May 1, 2008. The one month delay was the result of the electricity company being unable to provide electrical service to the Snow lease. The wells have good to excellent oil cuts ranging from 30% to 80% of the total fluid produced. These oil cuts correspond to the well log readings taken at the time the wells were drilled. The total fluid produced from the wells thus far has been low, however. The reasons for the above, are a combination of; 1) Mechanical pump problems; 2) Significant gas interference with the pumps; 3) Mud contamination due to the delay in start of production; 4) Formation damage during drilling and completion; 5) Cement contamination during installation of casing; and 6) Lower permeability formation properties. 

An acid stimulation was implemented in the past week on one of the wells to address symptoms due to items 3 through to 6 above. The other two wells will be treated in a similar manner, when the results are analysed. Additionally, all three wells have had the downhole pumps changed out. The pump shoe on Snow #4 showed a manufacturing defect that would limit the pump's efficiency.

The Lackie #A-4 well began production in mid-April, 2008. The well encountered a down-dropped fault block on the eastern plunge of the Tapia Field. It produced an average of 10.4 BOPD and101.9 BWPD in the month of April. The percentage of water in the production stream for this well is higher than expected, however it is believed that steaming the well will improve the productive rate in a similar manner to Yule #7.

The four new wells are all step-out wells and not the infill wells that have been drilled previously. Despite oil production rates not being what we have come to expect from newly drilled well in this field, the oil cuts as mentioned are good. This indicates that the development plan for this field is correct. 

EUREKA CANYON FIELD

Geochemical Survey Planning

TEG has been working with W.L. Gore, Inc. to undertake a geochemical sampling plan for the follow-up survey in Eureka Canyon. The original reconnaissance survey showed very encouraging exploratory potential on the eastern half of the 1500 minerals acres held by TEG. The follow-up infill survey is being designed to investigate in more detail the areas that displayed an elevated geochemical signature. TEG anticipates initiating data collection in the field in September, 2008.

TEG is currently working-over the Eureka wells to increase field-wide production levels. The work includes sand clean outs and pump, rod and tubing changes as necessary. Production in the field had declined to approximately 7 BOPD. We anticipate the work will increase the oil production by a factor of 2.5 to 3 times. These wells have not been serviced in nearly two years. Fine silt and sand gradually choke off production in the wells over time and require this type of maintenance. 

Enquiries:

Jeremy Delmar-Morgan, Chairman, Tel: 077 8900 4874

John James (Jim) Ellerton, CEO, Tel: 00 1 303 759 2700

David Millham, Investor Relations, Tel: 078 5094 9324

Jonathan Wright, Seymour Pierce Ltd., Tel: 020 7107 8000

Note: The information in this release has been compiled and reviewed by Harry Barnum, a director of Sefton, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas companies. Mr. Barnum has bachelors and Masters Degrees in Geology and over 20 years of experience in the oil and gas industry. He is a registered professional geologist in the State of California.

Sefton Resources is an AIM listed oil and gas production company. Its main core area of activity is in the East Ventura Basin in California, where is owns 100% of two oil fields, Tapia Canyon (heavy gravity oil) and Eureka Canyon (medium gravity oil), both of which have over twenty years of expected production life. In addition, Sefton has over 40,000 acres in the Forest City Basin of Eastern Kansas where Coal Bed Methane gas, as well as conventional oil and gas deposits, are targets.