(MENAFN- ProactiveInvestors - Australia) Solimar Energy (ASX: SGY) is now cashed up to fund production testing of up to 4 wells at its core Kreyenhagen project in the San Joaquin Basin, California.
The company has completed its C$4 million (A$3.88 million) private placement 80 subscription receipts at C$50,000 each principally to Second City Capital Partners, a fund controlled by Canadian investor Samuel Belzberg.
Solimar said the funds will be released pending the approval of shareholders which will be sought at a general meeting to be held in Melbourne, Australia on July 23, 2012.
The funds are being raised through a private placement of 80 subscription receipts at C$50,000 each principally to Second City Capital Partners, a fund controlled by Canadian investor Samuel Belzberg.
Each subscription receipt is exchangeable, for no additional consideration, into one C$50,000 convertible debenture that entitles the holder to receive 250,000 share purchase warrants.
Each warrant can be exercised for a new share in Solimar priced at C$0.12 up to 31 July 2015.
Emerald plans to re-enter up to 4 vertical wells that were drilled in 2007 before carrying out cold flow production testing of the primary Temblor reservoir that was not tested then.
This will be followed by cyclic steam injection, which involves the injection of steam into the reservoir, shutting in the well for a period allowing the steam to take effect, then producing back up the same well bore.
Results from the two tests will be compared to measure any production increases from the use of secondary steam enhanced production.
Success may lead to acceleration of drilling additional vertical and horizontal wells using the low cost cold flow techniques to accelerate early production as current prices of about US$100 per barrel of heavy crude have resulted in a robust commercial environment for heavy oil production.
Results from both tests will be used to generate a full field development plan to optimise recovery from the field with Solimar saying that a comprehensive steam flood operation is likely to be required.
Solimar previously said high recoveries of similar heavy oil had been achieved from the Temblor Sandstone in the nearest producing analogue, the giant Coalinga oil field, where more than 900 million barrels of oil (MMbbl) have been recovered.
Kreyenhagen has independently assessed unrisked oil in place net to Solimar's working interest of up to 79.1 million barrels of 13 to 18 degrees API oil.
Upside in the leases could come from the Kreyenhagen Shale which is the main source of oil in the surrounding fields and the Avenal Sandstone from which flows of light oil and gas have been recorded from several wells in the project area.
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