International Frontier Resources Corporation


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News Releases

Sep 08, 2004

Report to Shareholders

Dear Shareholders,

The following will provide an update on the Company's SIDOX pilot project and

Northwest Territories project;

Sidox Pilot Project
Brooks-Alderson Property

In late June Sidox was applied in five wells under the supervision of the Russian scientists that developed the Sidox technology. Field applications went satisfactorily and we now have a better understanding of the application process. Oil and water production rates are being measured on a daily basis. The following table compares average daily oil and water cuts pre and post Sidox application from the date IFR acquired the property on May 1, 2004.

Alderson Pilot Project
May & June July & August
Well Pre BOPD Pre Water Cut % Post BOPD Post Water Cut % Oil Increase % Water Decrease %
7-27 2.2 92% 7.9 69% + 359% 75%
8-27 4.5 64% 11.7 34% + 260% 53%
9-27 13.3 66% 12.1 45% - 9% 32%
5-26 13.1 62% 16.0 56% +22% 10%
11-26 10.7 77% 25.4 63% +237% 18%

Note: Post Sidox oil production rates are forecast to decline in the next 90 day period.

In late August Sidox was applied in the Alderson 10-27 well and the 9-12 well at Ferguson. Oil rates have increased and water cuts have decreased in both wells however there is not enough production history to include in the above table.

Based on preliminary results indications are that Sidox has;
  • Temporarily modified the relative permeability in the reservoir near the well bore.
  • Altered the mobility ratios of both oil & water in all 5 wells.
  • Increased oil rates in 4 of 5 wells.
  • Decreased water cuts in all 5 wells.
The first phase of the pilot project is scheduled for between 120 to 150 days. In the next phase wells will be selected for a second treatment of Sidox. As with any new technology there is a learning curve, this is what has been learned to date;
  • Sidox appears to increase oil rates and decreased water cuts in water wet reservoirs.
  • Sidox appears to work better in wells that have greater than 80% water cuts.
  • It appears likely that Sidox will achieve better results in pools that are being pressure maintained or water-flooded. In this regard a new water injection line will be installed at Alderson and produced water will be injected back into the producing reservoir, this project will be completed before the end of September.
  • The cost of applying Sidox in the field needs to be reduced.
Future data and information required.
  • To provide additional data points, the Company plans to acquire two or three more properties each with different reservoir rock properties. A comparison of different reservoirs with higher permeability and water cuts will provide valuable data.
  • The average time period that increased oil rates will be experienced.
  • Is there a minimum production rate required to achieve the optimum return on capital.
  • The effect of a second Sidox application on oil rates & water cuts.
  • The effect Sidox may or may not have on increasing recoverable oil reserves.
  • The impact on net present value of enhanced oil rates.
It's worthy to note some of the obstacles the Company faces;

  1. Industry's reluctance to buy into this new technology until completion of the pilot project/s.

  2. Vendor's price expectation for producing properties in today's high oil price environment.
Upon completion of the pilot projects results will be audited by an independent engineering firm. This third party report will assist the Company in discussing industry joint ventures to acquire additional oil production.

In summary the Company is pleased with the initial results of the pilot project however additional production data is required before deeming Sidox a commercial venture.

Northwest Territories Project

A 200 kilometer helicopter supported 2D seismic program covering EL-397, EL-416 and TDL parcel M-37 is currently in progress. Working interests in each land parcel are different resulting in IFR is paying 6.36% of this summer's seismic costs which are estimated at $9,000,000 gross (IFR net $572,000). Field acquisition should be completed by the end of September and processed data should be received by late October. The seismic covers a number of prospects on EL-397 & EL-416 as well as the Wilma B-44 and Big Bear (Betty) structures. A field geological mapping and geochemical survey was completed in late August, results are forthcoming. This datum will provide valuable information in understanding the regional geology.

The Company recently signed an operations notice and authority for expenditure ("AFE") for the drilling of a well on TDL parcel M-37. The Company will pay 5% of the gross well costs estimated at $18,000,000 (IFR net $900,000). TDL parcel M-37 is located within EL-397, the preliminary well location is Big Bear K-71 (formerly called Betty), the well will test a new structure located approximately five kilometers from the Wilma Summit Creek B-44 well. This well maybe deemed a title preserving well therefore failure to participate may result in forfeiture of any none participating parties interest in the remaining nine TDL freehold parcels. In the event a party elects not to participate then the participating parties each have the right to share the none participating parties interest on a pro-rata basis. This bit of land business needs to be finalized prior to partner's agreeing to release information on the Wilma B-44 well. The consortium is currently finalizing a completion program for the Wilma Summit Creek B-44 well. The preliminary cost estimate for the completion program is $16 million (IFR net $800,000). The program has been designed to provide extended production flow rates for one or more prospective reservoirs. The testing program is scheduled to commence in January 2005.

Next winters drilling and completion program will be a major undertaking. Construction and certain drilling equipment is currently being barged up the Mackenzie River and staged on the west side of the River so that an 80 kilometer access road can be constructed as soon as weather allows. As experienced last year, the time table for next winter's program will be tight. The Big Bear K-71 well will take approximately 95 days to drill and testing operations on the Wilma B- 44 well will take an estimated 80 days.

The Company has sufficient cash in the treasury to fund our NWT exploration program and to continue testing the Sidox technology.

Yours truly
Pat Boswell

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