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Desert Mountain Energy Corp
Symbol DME
Shares Issued 36,645,051
Close 2019-08-13 C$ 0.20
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Desert Mountain applies for KGSU drill permits

2019-08-14 10:05 ET - News Release

Mr. Irwin Olian reports


Desert Mountain Energy Corp. has now filed two separate applications with the Oil & Gas Conservation Division of the Oklahoma Corporation Commission in Oklahoma City to acquire drill permits for two new primary wells in the company's Kight-Gilcrease sand unit (KGSU) oil field in Seminole county. The two wells will be simple, vertical wells drilled to a depth of approximately 2,950 feet each from sites located at an altitude of about 887 feet, relatively high on the structures that are being targeted for their potential to host reservoirs of helium, oil and gas. They are designed to test five stratigraphic zones known to exist in the KGSU, namely the Calvin, Senora, Earlsboro, Booch and Gilcrease sands, which are located, respectively, at 1,170, 2,490, 2,620, 2,670 and 2,820 feet. Management anticipates that the permit applications will be approved shortly and does not anticipate any issues or delays. Drilling will commence shortly after the permits are granted, subject to drill rig availability.

The company previously announced (see news release dated May 13, 2019) that analytical tests performed on gas samples from three existing oil and gas wells on the KGSU returned positive results for the presence of helium (He), with concentrations up to 1.3622 per cent He. These test results are consistent with helium concentrations being produced from other U.S. natural gas fields in Kansas, Oklahoma and Texas. These encouraging results led management to conclude that a drill program to evaluate the helium potential of the KGSU should be undertaken as soon as practicable. Accordingly, management has devised a two-hole drill program designed to test the five zones noted above for helium, oil and gas. While the KGSU remains a strong target for enhanced secondary waterflood production of oil from the Gilcrease zone, helium now adds a new dimension to the property.

Helium is the second-lightest element (next to hydrogen) and has the smallest molecular size of any element on earth. Accordingly, it defies gravity and tends to rise to the surface of the earth's crust and dissipate into the atmosphere and space unless it is retained by effective trapping mechanisms underground. The stratigraphic zones above the Gilcrease sands are viewed as highly prospective for helium gas in the KGSU. These zones provide a wide target for additional helium, potentially higher in grade than that recently sampled from the Gilcrease sands due to the above-noted tendency of helium to rise toward the surface. These zones are viewed as highly prospective because of their dense lime or anhydrite cap and close proximity to known or indicated fault structures. The recent discovery by the company of helium gas just below them in the Gilcrease sands is extremely suggestive that helium will also be found in these zones.

By way of background, the KGSU was permitted and approved by Oklahoma Corporation Commission (OCC) by order No. 375263 dated July 19, 1993, as an enhanced oil recovery project primarily utilizing waterflood secondary recovery operations, in an administrative proceeding that consolidated and unitized all working and royalty interests in the project. The KGSU has had historic production estimated at 1,690,240 barrels of oil by the OCC and presently has seven wells on site, one of which is operational. The oil produced is a light sweet crude that varies from 34 API to 43 API gravity.

The KGSU comprises an area of approximately 883.7 acres, which is substantially underlain by the Gilcrease sandstone common source of oil supply. The KGSU leases are located eight miles south of Wewoka directly astride State Highway 56, in a portion of the S/2 of Section 6, all of Section 7 and the northwest/4 of Section 18, T6N R8E, Seminole county, Oklahoma. It is not located within an environmentally sensitive area or on a known native American reservation. The oil-bearing pay zone was estimated by the OCC to be from 10 feet to 40 feet in width and to occur at a subsurface depth of approximately 2,726 feet to 2,810 feet, as reflected in geophysical logs from the Adams No. 1 Maverick well drilled in the southwest/4-southeast/4-southwest/4 of Section 7-6N-8E, Seminole county.

According to Irwin Olian, chief executive officer of the company: "We are very excited to be moving forward with our drill program on the KGSU, as it gives us potential for helium production in Oklahoma as well as advancing the waterflood program designed to be undertaken in the future on the KGSU to create secondary production of oil. These shallow vertical wells should be drillable quickly at low cost following permit approval. While the Heliopolis project in Arizona remains our flagship property and immediate priority, it is encouraging to have another property in our portfolio with strong potential for future helium production. We are just now completing our seismic studies and targeting work on Arizona's Holbrook basin and expect to be filing drill permit applications there shortly."

About Desert Mountain Energy Corp.

The company is an exploratory resource company engaged in exploration and development of helium, oil and gas, and mineral properties in the southwestern United States. Until Sept. 5, 2018, the company also owned the Yellowjacket gold project in Atlin, B.C., which it had been developing. The company has its executive offices in Vancouver, Canada. The company was incorporated under the laws of the Province of British Columbia, on April 30, 2008, and was formerly named African Queen Mines Ltd.

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