North Peace Energy, Inc.

Background

In June and July 2008, Surge exchanged 606,401 North Peace Energy shares for all of the outstanding Cold Flow Exchangeable shares and 3,189,617 Surge common shares, leaving a balance of North Peace shares owned from the Peace transaction at 1,716,000 shares, or approximately 3% of North Peace as of September 2008.

In June 2007, Surge received 2,270,430 shares of North Peace Energy Inc. (NPE.V) as part of the compensation for the sale of 30% interest in Alberta Oil Sands property.

North Peace Operations:

Block B (South) identified as area of greatest prospectivity

• 28,800 acres
  
• Discovered Petroleum Initially-In-Place(1)(2) of 1.0 to 1.6 billion barrels in place
  

Reservoir characteristics:

• Bluesky formation
  
• Reservoir depth 400 metres
  
• 10 to 16 metres bitumen thickness (24 contiguous sections average 12 metres of net pay)
  
• Oil gravity averages 10º API
  
• Porosity averages 31%
  
• Oil saturation averages 60%
  
• Marine depositional environment

North Peace’s primary asset consists of approximately 86,400 acres of oil sands leases in north central Alberta with 2.0 to 3.1 billion barrels of Discovered Petroleum Initially-In-Place(1)(2). North Peace has 100 percent working interest.

North Peace has drilled and cored 17 wells on this asset since the company’s establishment.

Having completed internal resource characterization and thermal recovery modeling, North Peace is focusing on Block B (South) of its land base initially. ERCB approval for a 1,000 bbl/d pilot Cyclic Steam Stimulation (CSS) recovery project was granted in June 2008. North Peace is progressing with this pilot project, and the Company anticipates that construction on the pilot will begin in summer 2008 followed by first steam and oil production during winter 2008/09.

(1) Discovered Petroleum Initially-In-Place (equivalent to discovered resources) is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable.
(2) Sproule Associates Ltd independent report dated December 31, 2006

 

Cyclic Steam Simulation: How high pressure CSS works

Steam Injection phase

• Steam is injected at high pressure into oil sand formation for several weeks
  
• Steam heats bitumen (reduces viscosity)
  
• High steam injection pressures create fissures in formation thereby maximizing bitumen contact and production
  

Production phase

• Steam injection is stopped and heat dissipates in reservoir (soak)
  
• Well produced for several months until temperature and production rates decline
  
• Steaming and production cycle is repeated
  

Why CSS?

• Robust commercially proven technology
  
• Depositional environment is that of a coarsening up sequence with improved permeability & oil quality towards top of reservoir
  
• Thin discontinuous minor clay laminations inhibit vertical flow paths, CSS pierces through these
  
• Absence of thief zones
  
• Thick continuous capping shale (45m+)
  
• Comparable commercial producing analogue at CNRL’s Primrose South CSS project
  
• The right recovery method for our resource
  
  

Companies currently using CSS commercially in Alberta:

• Imperial Oil (Cold Lake) – 140 mbbl/d (CSS)
  
• Shell Canada (Peace River) – 12 mbbl/d (CSS)
  
• CNRL (Primrose, Wolf Lake) – 80 mbbl/d (approx. 90% CSS, 10% SAGD)