Point Loma Resources announces the execution of a letter of intent to farmout exploratory lands where up to three horizontal wells may be drilled

CALGARY, AB – Point Loma Resources Ltd. (TSXV:PLX) (“Point Loma” or the “Corporation“), which controls a land base of over 161,000 net acres (250 net sections) and a deep inventory of oil and gas opportunities, is pleased to announce the execution of a binding letter of intent (the “LOI”) outlining a farmout agreement with a private company (“Privco” or the “Farmee”) which includes a commitment by Privco to drill a horizontal well on at least one of the Corporation’s oil and gas projects. The LOI is subject to the execution of definitive farmout and purchase and sale agreements incorporating the terms of the LOI and other industry standard conditions.

Farmout of Point Loma Lands

The LOI contemplates that Point Loma will initially assign 20% of the Corporation’s interests in three areas of mutual interest (“AMI”) lands to the Farmee in exchange for a commitment to drill a horizontal well on one of the three AMI lands to earn additional interests in the drilled AMI lands. Once the first horizontal well is drilled there is the opportunity for the Farmee to elect to drill and earn similar interests in the second and third AMI areas on a rolling option basis.

The first horizontal well is committed to be drilled prior to February 28, 2021. Should the commitment horizontal well not be drilled, there is a non-performance penalty of $100,000 payable to Point Loma and the initial assignment of lands to the Farmee would be nullified and revert back to Point Loma.

The drilling of an earning well will result in either a 15% GORR payable to Point Loma convertible at payout to 50% of the Corporation’s pre-drill working interest or, at the election of the Farmee, the Farmee will earn 70% of the Corporation’s pre-drill working interest in the block of AMI lands on which the drilling occurred.

AMI Areas

The AMI lands contain three of Point Loma’s high-graded exploration opportunities at Leaman, Wildwood and Paddle River. In total Point Loma currently holds 14,711 net acres in these three areas.

Leaman AMI – Upper Mannville Oil and Natural Gas (Wizard Lake Rex Analog)

Point Loma has internally identified and captured an Upper Mannville pool target which is analogous to the Corporation’s Rex discovery at Wizard Lake in 2018 that led to the development of three successful oil wells currently producing approximately 500 bpd oil and 2 MMcf/d natural gas. The target zone appears to have similar reservoir characteristics to the Wizard Lake development and internal mapping indicates a potential pool size of approximately 6 to 8 sections. This could result in 15 to 20 follow-up opportunities with success.

Wildwood AMI – Lower Mannville Oil and Natural Gas

Point Loma has internally identified and captured multiple Mannville pool targets which appear analogous to the Corporation’s operated Paddle River Lower Mannville producing oil and gas pool. The target zones are thicker and appear to have similar reservoir characteristics to the existing Paddle River development. Certain pools are expected to be light oil and others natural gas accumulations. Internal mapping indicates the potential for 15 to 20 follow up opportunities upon a successful discovery.

Paddle River AMI – Banff Oil

Based on proprietary 3D seismic shot by the Corporation, Point Loma has internally identified two high impact Banff oil targets in the Paddle River area. As interpreted, these pools are analogous to developments in the offsetting Cherhill and St. Anne areas which have accumulations of up to 90 MMbbls of original oil in place. The Corporation plans to utilize horizontal multi-stage completions to develop these pools upon success. The only previous horizontal wells drilled in the region utilized dated technology and were completed as open holes yet achieved initial production rates ranging from 200 to 800 barrels of oil per day.

Increases in Natural Gas Production Weighting and Indications of Strengthening Prices

The Corporation’s natural gas production was bolstered in late 2019 by the transfer of approximately 240 boepd (net) of natural gas weighed production from its partner Salt Bush Energy Ltd. in association with the Stage 1 closing of the Wizard Lake property disposition. Point Loma’s production mix is expected to be further natural gas weighted upon the disposition of the majority of the Corporation’s remaining interest in Wizard Lake scheduled to close in late May 2020.

The onset of Covid-19 has had a negative impact on world oil demand and prices and has resulted in a substantial reduction in drilling activity and production shut-ins in North America. As a consequence, associated natural gas production is expected to continue to fall, resulting in a reduction in supply to the North American natural gas market. Natural gas futures prices have begun to reflect the markets expectation for tighter supply later this year.

About Point Loma

Point Loma is a public oil and gas exploration and development company focused on conventional and unconventional oil and gas reservoirs in west central Alberta. The Corporation controls over 161,000 net acres (250 net sections) and has a deep inventory of oil and gas opportunities. Point Loma’s business plan is to utilize its experience to identify, acquire and develop accretive assets with potential to employ horizontal multi-stage frac technology and to exploit opportunities for secondary recovery. For more information, please visit Point Loma’s website at www.pointloma.ca or Point Loma’s profile on the System for Electronic Document Analysis and Retrieval website at www.sedar.com.