Hamburg

In February 2006, Arcan discovered the Hamburg GG oil pool. Arcan now has a 50.25 percent working interest in the pool and is operator of the oil battery and waterflood in the GG pool. Arcan's wells in the Hamburg GG oil pool produce light sweet 41° API oil and natural gas and a majority are located within the waterflood scheme. Arcan enhanced its water injection in the pool in March of 2010 by converting a third well to an injector and added a free water knock out to enhance water and production capabilities. At the end of 2010, cumulative production from this pool was approximately 1.1 million bbls of oil and 2.4 billion cubic feet of natural gas. Also, 1.8 million barrels of water had been injected. Arcan is currently producing 400 BOE per day net from this pool.

Arcan owns a 100 percent interest in the three sections of land immediately offsetting the Hamburg GG oil pool on the southern boundary and drilled one well on lands in December of 2010. Arcan currently has two to four infill development opportunities to drill in the Hamburg GG oil pool and will evaluate this program as economic conditions warrant.  Longer-term plans call for additional exploration tests that have been selected based on 3D seismic. There is potential for Arcan to shoot additional 3D seismic and the possibility of drilling up-hole Bluesky and Montney natural gas targets, where competitors are producing in offsetting sections, is currently being considered.

The Future

Arcan plans to continue water injection and possibly drill 2-3 additional producers as part of its development plans for the GG pool

In addition to ongoing development of the GG pool Arcan has numerous Slave Point natural gas prospects that it could drill. These exploration wells would complement any development drilling in the "GG" pool, and would be described as high impact exploration. Arcan is also reviewing possible development of Bluesky and Montney natural gas development in the area.

Arcan plans to continue to explore for new Slave Point reefs in the Hamburg area. Management has over 20 years of experience drilling Slave Point targets in this area, achieving a 65 percent historical success ratio.