Tomco Energy (NCS)- the next Cadence?

5.3 Information on oil shale

Oil shale is a general term used to describe those sedimentary rocks, generally
shales, rich enough in organic matter, kerogen, to yield synthetic petroleum
products following heating at temperatures of the order of 450-500 degrees C and
in the absence of air, a chemical process termed pyrolysis. Although oil shale
is a known source of oil, the cost of extraction is currently high relative to
other petroleum resources and consequently the potential has not yet been
realised on a truly commercial basis.

Existing methods of extracting oil from shale, which are described in further
detail below, currently produce oil at costs which are above the long term
historic price of oil. The Directors and the Proposed Director believe, however,
that the strategic benefit of producing oil in stable economic regimes such as
the US may encourage the development of more economic technologies and so enable
the commercialisation of the oil shale industry.

The US Geological Survey Professional Paper 548, published in 1967, reports
"Potential Reserves" based on yield assays prepared by the US bureau of mines
from some 39 core holes in the area and 20 exploratory wells and information
from the outcrops using the accepted Fischer assay method. "Potential Reserves"
for whole claim blocks were estimated, based on a minimum oil shale seam
thickness of 15ft and a minimum yield of 30 gallons per ton, and were classified
as "Indicated" or "Inferred" based on the proximity to the nearest drillhole.

The USGS estimates were reported for whole claim blocks, with the TomCo Leases
covering sub-sections of these. Notwithstanding this, and applying the USGS
analysis to various full and part blocks of the TomCo Leases gives the
estimation of an "Indicated Potential Reserve" of 120 million tons representing
85 million barrels of oil, and an "Inferred Potential Reserve" of 150 million
tons representing 110 million barrels of oil, therefore totalling a potential
yield of some 195 million barrels of oil from shale.

SRK has independently estimated the potential oil content within the TomCo
Leases, using the same methodology as the USGS, but based on the data from the
four nearest drill holes to TomCo Leases only. Using this approach, SRK's
comparable estimate would be 390 tons with an overall potential yield of some
230 million barrels contained in oil shales with an average thickness of some
68ft and a mean yield of 25 gallons per ton.

Being an unconventional resource, oil shale does not fit easily into the usual
petroleum classification codes; SRK has chosen therefore to report using the
terms and definitions and guidelines proposed in the 2004 edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (the "JORC Code"). The JORC Code is designed primarily for the
reporting of hard rock mineral deposits, however it is applied on a wider range
of sedimentary mineral resources such as coal, and given that the TomCo Leases
could be exploited at least in part by open pit mining, SRK considers it to be
an appropriate code in this case.

TomCo's holdings occur in six separate lease areas. It is SRK's opinion that the
oil shale present in the three eastern most of these is sufficiently known to be
an Inferred Mineral Resource as defined by the JORC Code, and as such have
estimated these to contain some 200 million tons of oil shale containing a
potential yield of 120 million barrels with an average yield of 25 gallons per
ton. This resource could in theory be accessed via open pit mining and
"traditional" retorting of the shale to release the oil, although in situ
methods remain an option.

The oil shale within the three western lease areas lies under thicker overburden
(300 to 700ft) which would limit exploitation to in situ methods. While it is
almost certain that that the Green River shale is present within these leases,
the exact thickness of the yield of the oil shale remains uncertain as there is
no nearby drillhole data. Notwithstanding this, it is fully expected by SRK that
limited further drilling would enable a mineral resource to be reported for
these areas and that this has the potential to double the aforementioned
Inferred Mineral Resource thereby bringing it into line with the USGS estimate.