News & Updates

Mr. Robert Sim reports

PETROSTAR PETROLEUM CORP. TO MOVE FORWARD WITH VERTIZONTAL RECOVERY SYSTEM… PRIVATE PLACEMENT RECEIVES TSX VENTURE EXCHANGE APPROVAL…

Petrostar Petroleum Corp. has entered into an agreement with AT Energy, a private oil and gas company, whereby Petrostar will receive AT’s water production from its 01-48-24W3 lease, which is located adjacent to Petrostar’s 06-48-23W3M. This will provide additional water supplies and reliable source to the EOR (enhanced oil recovery) development slated for the A1-16-6 well, which will be converted to a water injection well once SIR (Saskatchewan Industry & Resources) approval is received. Additional water may be acquired from other sources that will pay a disposal fee.

In November, 2006, the company completed the first, second and third of the planned phases of the VRS (vertizontal recovery system) process by drilling a new vertical stratigraphic well and two HRZ production wells. For the fourth and fifth phase of development, Petrostar is now waiting to proceed with converting the 1A16-6 HRZ production well into a water injection well, and for the final phase, the company will drill a third HRZ well that will run along the southern border of its Maidstone property at a total depth of approximately 575 metres. This effectively fences the property at both the north and south lease boundaries, which will contain all the increased production and recovery volumes due to the increase in the reservoir pressure.
Completion of the third well and final phase will constitute the implementation of the patented VRS production system, which has the potential to significantly increase daily oil production. The VRS system referred to here is a patented and trademarked drilling and production method that uses existing industry techniques that have been developed over the past several years. Production fluids from the reservoir are routed into the horizontal wellbore and in the opposite direction as they would be routed in the wellbore of a conventional horizontal well. From the wellbore, the fluids migrate toward an existing or newly drilled vertical well in close proximity of the horizontal wellbore recovery by conventional methods. The target date for completion of the VRS is for the third quarter of 2007.

Once tested, Petrostar intends to engage in commercialization of the VRS technology with Vertizontal Energy Inc., of Calgary, Alta. Petrostar currently has a 21.5-per-cent stake in Vertizontal Energy. The commercialization opportunity for the VRS technology is significant, as nearly 85 per cent of existing North American heavy oil reserves are shut in, suspended or marginally commercial due to pressure, drive and gravity (API degree) issues. The VRS coupled with the downhole heating device the company will be testing within the next 12 weeks has the potential to assist in addressing these issues and potentially providing a means to produce heavy oil that currently is difficult to extract.

The TSX Venture Exchange has approved the investor relations agreement with Global Capital Group Ltd. of Fairfax, Va., and Cologne, Germany. The investor relations agreement is for 12 months starting on Feb. 1, 2007, and ending on Jan. 31, 2008, and the agreement is focused on European investors. The fee payable under the investor relations agreement is up to $150,000 (U.S.).

In addition, Petrostar is to grant options to purchase 500,000 shares of the company at the price of 20 cents per share for a period of five years. The options vest over 12 months in accordance with the policies of the TSX Venture Exchange.
The TSX Venture Exchange has approved the private placement as reported in Stockwatch on Dec. 11, 2006. The company sold 3.35 million common share units. Each unit consists of one common share in the capital stock of the company and one non-transferable share purchase warrant for a unit subscription price of 15 cents per unit. Each warrant entitles the holder thereof to purchase one additional common share of the company for a period of two years following the date of completion of the offering at a price of 25 cents per warrant share in the first year and at a price of 30 cents per warrant share in the second year. Directors of the company subscribed for 130,000 units. The shares are subject to a four-month hold period under TSX Venture Exchange rules.

We seek Safe Harbor.