Overview

Arcan has three main operating areas that reside within Alberta; Swan Hills (North Central Alberta), Hamburg (North West Alberta), and McLeod (West Central Alberta).

Arcan has typically elected to take a surgical approach of acquiring only the acreage that bears drilling opportunities. A large portion of the land holdings are blanketed with 3-D seismic, which has helped to identify and develop a drilling inventory that is in excess of 5 years. In 2011, Arcan’s focus was entirely on developing its Swan Hills acreage while continuing to maintain its production in its other two operating areas.

Significant growth since 2010 was only the start of the development of Arcan's 176 (171 net) sections of land.  At the end of 2011, Arcan has drilled 55 new horizontal wells and estimates up to an additional 40 horizontal producers be drilled in 2012. Its current risked drilling inventory on the Swan Hills lands is over 400 locations. The Swan Hills has long life, light sweet 40° API oil that historically has provided up to 40 percent recoveries of the oil-in-place under waterflood. Arcan continues to work towards unlocking the potential magnitude of reserves to be booked and recovered through drilling and waterflood activities in the Deer Mountain Unit #2 and across the Ethel field. The expected repeatability of the horizontal drilling and multi-stage fracturing technology is expected to convert the Swan Hills play from a long life light oil legacy resource play to a significant legacy growth opportunity.  Vertical well control, combined with the new 3D seismic and a growing number of horizontal wells, continues to increases Arcan's confidence in its development program and further reduce risk. In addition to Arcan's development, offsetting area competitors continue to provide drilling, completion, and operations data that Arcan will utilize to maximize its own understanding of the reef, and ultimately, shareholder value.

Arcan's Hamburg GG oil pool is also under waterflood and is currently showing good response to recently implemented injection targets. This oil pool is light sweet 40° API oil, covers approximately 13 sections of land and to date has recovered less than 10% of the oil in place. Arcan continues to maintain its production base in its Hamburg property.

Arcan has not focused on its natural gas McLeod area due to the relatively higher netbacks on light oil and the sizable development opportunities in our oil properties.