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Press release from CNW Group

CALVALLEY PETROLEUM - OPERATIONAL UPDATE

Thursday, May 05, 2011

CALVALLEY PETROLEUM - OPERATIONAL UPDATE20:03 EDT Thursday, May 05, 2011Calvalley Petroleum Inc. (TSX: CVI.A)CALGARY, May 5 /CNW/ - Calvalley Petroleum Inc. ("Calvalley" / "Company") is pleased to announce that it continues delivery of crude oil into the Masila Export Pipeline System ("MEPS") through the Company's Truck Offloading Facilities ("TOF") located at Block 51. Current deliveries consist of crude oil from Hiswah Field, in Block 9, and continue to utilize existing space in the Block 51 metering system. This temporary arrangement will be in place until mid-May, when the Company's own metering system will be fully functional, at which time Calvalley will immediately commence the shipment of blended crude from all Block 9 fields including Hiswah, Al Roidhat, and Ras Nowmah. As well, Calvalley's blended crude oil will continue to receive the Masila Blend price which is benchmarked to Brent Crude pricing.Calvalley also continues its evaluation of the Qarn Qaymah-3 ("QQ-3") well through a number of extended production flow and pressure build-up tests.  As previously announced, QQ-3 was drilled to a total depth of 4,460 meters, including a highly deviated openhole section of approximately 1,000 meters in the Fractured Granitic Basement ("FGB"). As per the evaluation reports from two independent petrophysical consulting firms, in Calgary, the wellbore image logs and electrical logs indicate that the FGB reservoir is extensively fractured and fully oil saturated. QQ-3 intersected a total hydrocarbon column of 434 meters, including 172 meters of condensate rich gas and 262 meters of oil column. The oil column could be potentially thicker, as no oil water contact has been encountered.  These independent petrophysical evaluations also highlight that average fracture porosity, which is a direct indicator of storage capacity or reserve potential of the reservoir, was significantly higher than QQ-2. This interpretation is in line with the improved rate of penetration experienced while drilling QQ-3, as compared to QQ-2.During the QQ-3 initial testing phase, the test recovered a significant volume of drilling fluid which was used in drilling of the adjacent well (QQ-2) but this gradually turned to oil flow. However, the oil production was unsustainable due to limited inflow. Having produced the drilling loss fluid of QQ-2 from QQ-3 indicates that there is open communication between QQ-2 and QQ-3, which confirms the presence of a wide network of interconnected fractures in the FGB.  However, as intermittent flow and build-up testing proceeded, the permeability of the formation gradually declined, indicating impairment to fluid inflow to the well-bore from the formation due to a potential precipitation of hydrocarbon solids (such as Paraffin and Asphaltene), in the openhole section of the QQ-3 well-bore. A number of fluid samples were collected for lab analysis.While Calvalley is encouraged with the increased hydrocarbon column and presence of an extensive network of natural fractures in the basement of the Qarn Qaymah structure, the key challenge ahead for the Company is to remove any impairment that limits oil inflow. The Company is optimistic that the pending lab test results will indicate the potential of down-hole chemical treatment to prevent the future deposit of paraffinic and asphaltenic compounds, which is a common production impairment phenomenon in many oil fields around the globe.Calvalley's plan, going forward, includes the completion of the currently proceeding laboratory analyses of formation fluids, followed by the design of a remedial stimulation program to enhance oil inflow. The Company is in communication with a number of experienced global oil services companies to assist in designing a suitable stimulation program for QQ-3.The recently completed Ras Nowmah East -1 (RNE-1) exploration well reached to a total depth of 1559 meters on April 6.  The primary target zone of Qishn Clastics was encountered, as expected, and a number of intermittent oil shows were encountered at depths from 1390 - 1466 m. Electrical logs were run and these were independently interpreted to have a potential net oil pay of 13 m (60 m gross), at depths from 1390m to 1471.5m, with a calculated average oil saturation of 44%.  Based on these indications of the presence of an oil charged system, from both logs and drilling cuttings, the well was cased and tested.  Unfortunately, the test results were disappointing and produced mainly formation water. The Company expects to utilize RNE-1 data to optimize future exploration success in the immediate Plateau Area.  Based on the growing evidence of oil migration throughout the region, the Company will continue investing in exploration activities over this Plateau Area of Block 9.Calvalley is an international oil and gas company, with offices in Calgary, Alberta, Canada, that operates its 50% working interest in Block 9 of the Masila Basin, in The Republic of Yemen. Calvalley also operates its 100% working interest in the Gimbi and Metema Blocks of the Blue Nile Basin, in The Republic of Ethiopia.THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.This press release may contain forward-looking statements including, without limitation, financial and business prospects and financial outlooks, and such statements may be forward-looking statements which reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve significant risk and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. Forward-looking statements and other information contained herein concerning the oil and gas industry and Calvalley's general expectations concerning this industry are based on estimates prepared by management using data from publicly available industry sources as well as from reserve reports, market research and industry analysis and on assumptions based on data and knowledge of this industry which Calvalley believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While Calvalley is not aware of any misstatements regarding any industry data presented herein, the industry involves risks and uncertainties and is subject to change based on various factors.For further information: investorrelations@calvalleypetroleum.com or +1 (403) 297-0490 Edmund Shimoon, Chairman and CEO Zacharie Magnan, Vice-President Finance and Acting CFO