"Waterflood" is an oil extraction method where water is pumped into an injection well displacing the reservoir formation and forcing the oil into a recovery well. This method is used to recover additional oil in place following primary production methods.

Strategic American Oil has identified and began leasing waterflood projects which offer the Company potential low risk long-term production project in a proven waterflood areas. The Company is currently evaluating and performing feasibility analysis on this target.  Meanwhile, SGCA is also designing a pilot waterflood operation for the initial Waterflood Project, which, if proven, would be expanded into commercial operations.

Strategic American Oil recently announced that it has executed Farmout and Joint Operating Agreements with Core Minerals Operating Co., Inc. to develop the Company’s initial waterflood project in Markham City North, Illinois.The Agreement requires Core to commence development of the field on or before June 30, 2011. Strategic American Oil has retained certain carried working interest in the field which, after development activities have commenced, will eventually increase to at least 25 percent. The primary target at this time is the McClosky formation, which has been successfully waterflooded in several other Illinois Basin fields. This field originally produced approximately 1.6 million barrels of oil and it is estimated that there could be as much or more oil remaining to be recovered.

The Illinois Basin is a mature oil producing environment with a production history covering over 100 years. This development history has generated a large database including records for more than 180,000 wells. SGCA is working to grow its reserves and accessing and analyzing these historic records minimizes cost while identifying exploration and historical production targets to meet that growth. To date the Company has leased over 2000 acres in Illinois through utilizing these records. Finding and leasing this waterflood project demonstrates the value of these historic records and the Company's expertise in managing those records.
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