Nicaragua

1
Nicaragua

• Sleeping Oil Giant?
• October, 2007

2
Overview

• Brito Energy, a unit of Black Star 231 Corp.,
  presents an attractive petroleum project in
  Nicaragua (The Brito block).
• Nicaragua is located in Central America south of
  Honduras and north of Costa Rica.
• Data on Nicaragua is presented at the end of the
  presentation.

3
Geographic Map of Nicaragua
4
Brito Energy - Exploration Program

• Brito Energy presents a three phase petroleum
  exploration program.
• Phase One Black Star 231 Corp owns a 10,000
  acre block in SW Nicaragua, do 2D seismic work on
  the block and prepare for Phases Two and Three.
• Phase Two - Complete exploration and drill a
  well(s) on the Brito Block.
• Phase Three - Expand our operations by
  aggressively pursuing projects in Nicaragua and
  Central America.

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Phase 1 - Brito Block

• Brito Energy owns 10,000 acres in SW Nicaragua.
• The Brito block is in a checker-board 20,000 acre
  block with Norwood Resources Ltd. holding the
  other 10,000 acres.
• The data indicates 10-13 thousand feet of
  sedimentary section on the Brito block.

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Phase 1 - Brito Block

• Norwood Resources Ltd, of Canada, has reported a
  frontier, wildcat discovery of oil, gas, and
  condensate some 30 miles north of Britos block.
• The Brito block has a mapped surface anticline
  some 12-15 km. long. This structure was mapped by
  photo geological mapping and verified by
  geological field work.

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Picture shows strong SW dip of the Brito
formation. The rocks cropping out are
medium-grained, well-sorted sandstones. The
sandstone has been weathered.
8
Pictures showing outcrop of Brito sandstone.
Several local faults are seen.
9
Picture of long linear stream valley. We believe
that this valley was formed by a major NW-SE
fault trending parallel to the linear anticline.
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Phase 1 - Brito Block

• The Norwood strike encountered oil/gas in the
  Masachapa and Brito formations. A very thick
  oil/gas saturated reservoir was logged and cored.
  
• In the Brito anticline, we will spud in the Brito
  formation and will drill through the Rivas
  Formation.

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Phase 1 - Brito Block

• The Brito and Rivas formation have both
  reservoirs and source rocksdata from wells and
  surface work.
• The Rivas and Loma Chomico formations have very
  good source rocks with 57 TOC reported in the
  shale. TOC is Total Organic Compounds. TOC is a
  common method of evaluating the richness of a
  source rock. 10 TOC is considered to be a very
  good source rock.
• As the Brito anticline is a closed structure, we
  have reservoir rocks, structure, source rocks and
  seal, all of the main ingredients for an oil
  field.

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Phase 1 - Brito Block

• The Brito block is located in the Sandino Basin.
• The Sandino Basin encompasses SW Nicaragua and
  most of the Pacific offshore out to the Cocos
  Plate.
• The Brito formation and the Rivas formation are
  both marine deposits with a significant amount
  being turbidite deposits.
• The porosity in both formations is 17-20.

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Brito Block - Phase 1

• The Brito formation is of Paleocene age.
• The Brito formation lies, unconformably, on the
  Rivas formation which is Cretaceous age.
• Permeability in both formations appears to range
  from low to very good.

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This slide demonstrates our concept of the Brito
anticline. A NW-SE fault parallel to the
anticline is suggested. Strong SW and NE dip is
well exposed on the NE and SW side of the
anticline. The Brito anticline is a long, linear
structural feature possibly caused by pressure
from the offshore Cocos plate being sub-ducted
under the Nicaraguan plate. Many volcanoes are
present in SW Nicaragua
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Phase 1 - Brito Block

• Norwood released the following press release
  Norwood has drilled the San Bartolo well to a TD
  2680 meters, encountering gas, condensate and
  light oil in various turbidite sands from the
  Brito formation. Eight separate zones were
  logged.core analysis indicated 17-21
  porosityit is reported that the pressure is
  high and the liquids are of superior quality of
  54 degrees API gravity.the structure is believed
  to encompass about 20 sq. km...

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Phase 1 - Brito Block

• The Norwood well is reported to be on a fault
  block with a large, down-to-the-east fault on the
  eastern side of the block..
• Norwood drilled what they believed to be a large
  surface anticline. The anticline was not found
  but Norwood still had a trap for oil. This trap
  was formed by strike slip faulting where the
  lateral movement of sediments effectively sealed
  off the reservoir. Norwood maps strike slip
  faults in many areas of their acreage.
  

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Diagram of Norwoods Structure
The large NW-SE fault forms a seal for the
eastward closure. The two strike slip faults, A
B, form the reservoir trap to the north and
south. The well had excellent shows of oil/gas,
but heavy mud and lost circulation material
caused all permeability to be sealed off. If the
well had no damage, it could have been completed
at a flow rate of at least 1,000 BOPD.
20
Cross Section of Norwoods Drilling Location
Norwood believed that on the east side of the
anticline, that the rocks would all dip downward
as the surface anticline indicated. But, the
smaller associated fault caused only a thin
surface section to dip to the east.
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Norwood Expected Reserves

• Norwoods wells could have been completed as 1000
  BOPD wells. Norwood has a large area with
  abundant strike slip faults resulting in traps of
  oil/gas. Clearly, Norwood ultimate reserves of
  recoverable oil could be in the high hundreds of
  millions of barrels of oil or gas equivalent.
• Exploration in the Norwood block is just
  commencing.

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Brito Expected Reserves

• Brito expected reserves of oil/gas are
  substantial.
• Britos anticipated reserves of oil/gas are
  between two hundred million barrels and four
  hundred million barrels.
• Brito has a series of strike slip faults similar
  to Norwood.
• If the strike slip faults yield an array of
  structures, this figure could be much higher.

23
Landsat with Anticline Overlain
Landsat scene with surface anticline (in red).
The landsat picture shows the rough terrain of
the area.
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Strike slip fault
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Phase 1 - Brito Block

• Thus, the Brito block is an excellent prospective
  area. Brito has a large structure, plus all the
  other elements necessary for an oil field.
• The Brito block is on trend with, and exhibits
  the some of the geological attributes as the
  potential frontier discovery announced by
  Norwood. The Norwood well will open up extensive
  exploration in the Sandino basin.
• The Loma Chomico shale with some 57 TOC is one
  of the richest source rocks that have ever been
  recorded.
• The geochemistry report has good results.

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Strike slip fault
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Phase 1 - Brito Block

• This is an exciting oil play. We have enough
  information to strongly suggest that this basin
  will develop into a major oil province.
• The long anticline together with the regional
  fault on the NE side of the anticline suggests
  that the structure is big enough to be a major
  oil find.

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Phase 1 - Brito Block

• We recommend that about 250 line km. of 2D
  seismic data be acquired over the Brito Block.
• 1 km grid over block with regional extensions
• Mob and De-mob expenses higher due to lack of
  local service companies
• Seismic processing and interpretation

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Budget - Phase 1

• Brito Block (SW Nicaragua)
• Purchase acreage 3.25 MM
• 2D Seismic work 2.50 MM
• Acquisition, processing,
• and interpretation
• General/Admin. .25 MM
• Total Phase 1 6.00 MM

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Phase 1 - Recommendation

• The Brito block is highly recommended. As the
  structure has already been mapped, only a minimum
  of seismic lines must be shot. Thus, drilling can
  start at an early stage. The technical evaluation
  of the regional geologic framework is now
  completed.
• The Brito block is part of the same complex of
  structural features all owing their origins and
  existence to the same tectonic events that have
  given rise to the thick oil saturated section in
  the Norwood discovery wells.
• The Brito anticlinal structure is located down
  trend from Norwoods potential discovery. The
  Brito structure has good reservoir rocks and
  superior source rocks, which together with the
  geochemical survey indicates an exceptional
  prospect.

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Phase 2 - Brito Block

• We recommend that three wells be drilled on the
  Brito Block, each to a total depth of 9,000 feet.
  
• The first three wells on the Brito block can be
  drilled and tested in one year.

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Budget - Phase 2

• Brito Block - SW Nicaragua
• Drill three wells 14.2 MM
• - Includes overhead GA
• - If any of the first three wells are
• commercial, we would strongly
• recommend development drilling
• 3D Seismic acquisition .6MM
• Total Phase 2 14.8 MM

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Picture of local people living on a small farm.
The farm is located near the crest of the Brito
anticline. The people appeared to be content in
spite of their barely subsistence living
standard. It was good to see the obvious
affection of the parents to the children.
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Operational Risk

• Operational risk is low. Lack of good roads in
  the Brito block may slow down drilling operations
  slightly.
• Lack of drilling rigs and petroleum
  infrastructure suggests that practically all
  equipment will have to be imported into
  Nicaragua.
• Intensive training will be required for local
  labor especially in preventative maintenance and
  safety.

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Phase 3

• Phase 3 is to aggressively pursue, additional
  specific projects
• Project A
• This acreage is offshore from the Brito block in
  SW Nicaragua.
• The area is prospective and we can exploit our
  knowledge of the contiguous onshore Brito block.

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Phase 3

• Project B
• Onshore Nicaragua - NE area.
• Large well defined surface prospects with
  abundant oil seeps.
• Project C
• Offshore Nicaragua - Atlantic side.
• The Atlantic side has great possibilities and is
  greatly under explored.

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Budget - Phase 3

• Onshore Block - NE Nicaragua
• 1000 km Seismic 5.0 MM
• Surface geology .2 MM
• Drill Well 4.0 MM
• Offshore Block - SW Nicaragua
• 500 km Seismic
  2.5 MM
• Drill well 8.0 MM
• Total Phase 3 19.7 MM

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Composite Budget

• PHASE 1 6.0 MM
• PHASE 2 14.8 MM
• PHASE 3 19.7
  MM
• Total of three phases 40.5 MM

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Time Line - Phases 1 2
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Time Line - Phase 3
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Tentative Economic Analysis

• Assumptions
• Drill 80 wells, 40 in year one and 40 in year two
• Well costs 160MM first year, 160MM second year
• Field facilities 30MM year one, 10MM year two
• Pipeline 10 inches X 25 miles X 50,000/inch
  diameter mile 12.5MM
• Tankage 15MM (5MM year one, 10MM year two)
• Buoy and sea lines 2MM
• Note Cost of Managua office etc. rolled into
  well costs

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Tentative Economic Analysis

• Case 1
• Oil Production 300 bopd/well
• Net revenue income to working interest 20/bbl
• Results Payout in 4 years, ROR 50
• Case 2
• Oil production 3000 bopd/well
• Net revenue income to working interest 40/bbl
• Results Payout in second year, ROR 100

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Tentative Economic Analysis

• Case 3
• Oil Production 1000 bopd/well
• Net revenue income to working interest 30/bbl
• Results Payout last quarter of year 2, ROR 100
• Even under the worse case scenario of 300
  bopd/well the economics are still attractive
• These economics were run to see if wells which
  are high cost and with low production rates would
  be economic.

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Nicaragua Central America

• Brito Energy suggests that, in general, Central
  America and Nicaragua in particular will see a
  great expansion in petroleum exploration.
• Brito Energys goal is to is to be a major player
  in this expansion.

46
References

• The results of the geochemical analysis to the
  Loma Chumico are in a range 10 to 55 TOC,
  kerogene type I y II made by Simon Petroleum
  Technology Ltd. Reference D.R. Clowser, I.
  Cutler, M.H. Girgis, J.F. Laing, D. Wall from
  SIMON PETROLEUM TECHNOLOGY LIMITED, 1993.
• Biostratigraphic and geochemical studies of
  outcrop samples, INE-RECOPE Project. Humble
  Geochemical Services confirmed that the Loma
  Chumico formation, the kerogene is II - S type
  (rich in sulfurs) and generated hydrocarbons
  under termic pressure below that the kerogene
  type II.

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Geography and People

• Population 5.7 million
• Area 49,998 sq. miles
• Capital Managua (1MM pop.)
• Terrain Mountainous
• Climate Tropical/subtropical
• People 69 Mesitzo (mixture of Indian and
  European)
• Literacy 68.2
• Language Spanish, English (2nd language)
• Religion Roman Catholic, Protestant minority