Specifically, Golden Cariboo is able to achieve this finely calibrated risk/reward ratio by farming-in on such projects as a minority partner with other oil & gas juniors that are established project operators. Typically, such operators prefer to defray the risks involved in exploration and development by the drill-bit by farming-out working interests in their drilling programs. If all goes well, it’s a win-win situation for both (or more) parties involved.

 

It is therefore important to appreciate that Golden Cariboo is not a ‘buy and exploit’ company, unlike so many others. Rather, the Company’s aggressive drill-bit driven growth strategy has its inherent risks. But they are more than compensated for by a corresponding increase in the opportunities for lucrative rewards. The merits of this shrewd business model are further illustrated by the likelihood of a fast payout on invested capital in successful wells. This is because the Company is active in regions that have historically also generated high deliverability per well and high cash flow per barrel of oil & oil equivalent per day (boepd).

 

Golden Cariboo’s initial joint venture agreements offer the added ‘sweetener’ of the option to participate in additional contingent low-risk offset drill prospects – ones that are strategically located on contiguous (adjoining) farm-out leases in established oil & gas pools. Typically, such drill targets are selected on the basis of being geologically analogous to other successful wells in the area.

 

The convergence of such an array of compelling value drivers therefore promises to establish this up-and-comer as a clear stand-out among North America’s multitude of low capitalized oil & gas equities.

 

Let’s now look at one particular project that promises to have significant near-term impact on Golden Cariboo’s share price, namely the 12-13 Mississippian Well. Readers, take note that this exploration and development drilling program is expected to be completed by as early as mid September. Located in close proximity to the city of Calgary in southern Alberta, this ongoing drilling program is focused on a deep natural gas target with potential multiple pay zones down to a maximum drill depth of around 3,300 metres.

 

The well benefits from several key dynamics that attest to its considerable potential. First, it is situated on the largely-unexplored Tsuu T'ina First Nations Lands (also known as the Sarcee Indian Reserve). This is especially relevant in that this land package bisects a major north-south geological trend or belt that hosts numerous producing oil & gas fields or pools. And the drilling is targeting reef structures within the Turner Valley Pool, which is host to an estimated 1.4 trillion cubic feet of gas.

 

Importantly, this is the first time that the Tsuu T’ina First Nations people have allowed drilling on their land since the advent of state-of-the-art 3-D seismic technology (a sub-surface scan of geological formations) and other leading-edge oil & gas finding technologies. Notably, many recent drill successes have been attributed to the effective use of such advanced, corroborative exploration techniques, as well as new and innovative well completion and production technologies.

 

The odds in favour of success are also supported by the well’s close proximity within the same geological environment to two other wells that have historically proven to be prolific producers. They include Shell Canada's Shell Sarcee No. 1 Well which has pumped out 86.7 billion cubic feet of gas (bcf) since 1958. Even to this day, it is still producing at an impressive rate of 1.446 million cubic feet (mmcf) of gas per day. Another of Shell Canada’s wells that was put into production in 1961 on the adjacent section of land has flowed forth with an equally eye-popping 92.4 bcf of gas to date. And it still accounts for in excess of one million cubic feet of gas per day.

Encouragingly, the 12-13 Mississippian Well is considered an offset well to Shell’s two big producers. Again, the target formation has been identified by way of a 3-D seismic survey and is analogous to other regional structures that have yielded rich pay zones. Hence, Golden Cariboo and its partners believe that this particular prospect has the potential to produce between 5-40 mmcf per day. For other wells in this particular pool, a 30-40 year reserve life is not uncommon.

Golden Cariboo is one of several consortium participants in this drill venture and has acquired a 10% participation interest in this test well in return for a Cdn. $545,053 contribution to the drilling costs. All told, the participation agreement calls for Golden Cariboo to pay 10% of the drilling costs to earn an after-payout 5% working interest in the 12-13 Mississippian Well section lands. In addition, the Company has the right to earn a further 5% working interest in contiguous (adjoining) lands by paying 5% of the drilling costs for three additional wells. 

By way of a little background, the drilling is taking place at the heart of a hydrocarbon-rich geological belt known as the Southern Alberta Mississippian Trend. From a geographical perspective, this belt of structurally deformed sedimentary deposits is knows as the Rocky Mountain Foothills region and it traverses the western margins of the province of Alberta in a north-south direction from the U.S. border to northeastern British Columbia.

 

The resulting hydrocarbon trapping mechanism is synonymous with oil & gas columns of up to several hundred metres. In other words, the Foothills host numerous oil & gas pools that boast significant recoverable reserves. This is largely due to the fact that a high incidence of faulting and folding in the earth’s crust have created fractures in the producing oil & gas horizons which enhance porosity and increase permeability. In turn, this translates into larger reserves and higher production rates. Without such extensive fracturing, many pools would simply not be economically viable.

 

Although the Southern Alberta Mississippian Trend has been explored and developed by many companies over the decades since its discovery, it is far from tapped-out. The advent of new regional geological interpretations, better quality seismic surveys and new drilling technologies continues to lead to the discovery of new oil & gas formations. In fact, this trend has proved a major factor in helping Alberta earn its reputation for being the world’s third largest supplier of natural gas.

 

Golden Cariboo has also very recently embarked upon another high-impact project with a high reward to risk ratio. The drilling, which commenced on the initial prospect in late August, will focus on a total of up to four offset or step-out wells in a proven oil field northwest of Calgary.

 

By way of explanation, the Company announced in August of this year that it has entered into a participation agreement with Mystique Energy, Inc. to earn a 15.625% net after-payout working interest in up to four wells. In return, the Company is committed to paying 25% of all costs associated with the drilling and completion of each well. The Company's portion of the costs for the drilling and casing of the first well is approximately Cdn. $200,000. Any further expenditure will be subject to the success of this initial prospect.  

The four-well development drilling program is located in the Lochend region in the vicinity of the Lochend Cardium M/O Pool, which has an estimated reserve base of approximately 270 million barrels of oil and 2.8 bcf of gas. Mystique Energy has enjoyed drilling success in this locality with five gas wells being put into production as recently as April of this year. Golden Cariboo anticipates that each of the wells it is participating in has the potential to deliver between 150-400 boepd.

The Company’s savvy and seasoned management team also understands the value of strength through diversification. Hence, the Company also offers its shareholders exposure to historically high metal prices (especially for gold) by way of its Cariboo Gold Project. Located near the town of Wells in British Columbia, this project is also adjacent to the historic town of Barkerville – the centre of the Cariboo Gold Rush in the 1860s. Up to Cdn. $900,000 has been allocated for the continuation of a district-wide exploration and development program for this project, beginning this fall. Of particular significance, this work program will include follow-up drilling to a 2004 eight-hole drilling program that produced very encouraging results.

 

Notably, the project encompasses the former producing Cariboo Hudson and Cariboo Thompson gold-and-silver mines on Golden Cariboo’s property, as well as the Cariboo gold-quartz mine and the Hardscrabble tungsten mine on the property of International Wayside Gold Mines Ltd. (TSX.V-IWA). It also straddles the Aurum, Island Mountain, and the Mosquito Creek gold mines on property which is jointly held between International Wayside and Island Mountain Gold Mines Ltd. (TSX.V-IGM). Both of these joint venture partners are sister companies of Golden Cariboo.

All told, the Cariboo gold project's landholdings now cover 456 square kilometres (170 square miles), spanning 57 kilometres (34 miles) in length and over eight kilometres (five miles) in width. In the Barkerville camp, 79 creeks have reported placer gold production. Recorded production from the area was 3.8 million ounces of gold (2.6 million ounces from placer mining and 1.2 million ounces from lode mining).

In summary, the Company benefits from an enterprising business model that offers investors considerable ‘blue sky’ or upside potential at an affordable price. Again, Golden Cariboo is following a shrewd strategy of farming-in as a minority partner on high-impact drilling programs that are operated by other oil & gas juniors with proven track records of success.

 

Hence, the Company is able to safeguard the interests of shareholders by not over-extending its exploration and development budget on any one project. This strategy therefore allows the Company meaningful exposure to achieving success on several different fronts without significantly diluting shareholders’ equity.

 

At the same time, the advent of near-term cash flow from any one or all of the Company’s joint ventured drill projects promises to build significant intrinsic value into Golden Cariboo’s share price. And the prospect of a steady infusion of drill-bit-generated cash flow should provide the financial springboard to fund other future high-impact drill projects. Likewise for the financing of contingent drill holes among the Company’s existing joint ventured project areas. All of this translates into a likely scenario of exponential revenue growth.

 

From a technical standpoint, the Company is in the process of completing a Cdn. $2.1 million equity financing which should increase the number of shares outstanding from approximately 24.7 million to about 33.4 million (translating into about 43.4 million shares fully diluted).

 

At SmallCapMedia.com, we regard the prospect of plenty of positive news flow and the absence of significant stock dilution as a surefire catalyst to higher share price valuations. Indeed, the likely advent of a steady stream of positive drilling news in the coming months should establish a sustained uptrend for the Company’s share price. Thus, we believe that Golden Cariboo Resources is primed to be a strong performer during the balance of 2005 and well into 2006.