*** GOLDEN CHIEF RESOURCES, INC. (OTCBB: GCHR) ***

Editors Note: It isn't often that an energy company possesses both proven assets and skilled management. Sometimes its one or the other, but rarely both.  The truth of the matter is, when we came across GCHR, the company wanted to make mention of both of those attributes and its excellent reputation. That made the company just the type of undiscovered, confident operation we like to bring to our readers. In the oil services industry, its often tough-going. Consolidations and volatile prices seem only outdone by one international crisis after another. Even with new, alternative power-technologies coming into the market, it seems the world will be oil-energy dependent for a long time to come.  We think U.S. domestic production deserves a second look.  See what you think ...

*** TODAY'S NEWS FROM GCHR ***

Thursday August 1, 2:53 pm Eastern Time

Press Release

SOURCE: Golden Chief Resources, Inc.

Golden Chief Resources to Acquire Interest in Southeast New Mexico Gas Field

DALLAS, Aug. 1 /PRNewswire-FirstCall/ -- Golden Chief Resources, Inc. (OTC Bulletin Board: GCHR - News) announced it has entered into a Letter of Intent to acquire a 10% working (7.5% net revenue) interest from Clem Properties in a well and the 320-acre unit in the Ross Draw Field, Eddy County, New Mexico for Golden Chief Resources stock. The well is presently completed in the Wolfcamp formation (12,270'-300', 12,536'-606') and is currently producing gas.

Completed in the Morrow formation (14,305'-405') the well had accumulated 2.5 Bcf gas. Reserve estimates made in 1999 indicated there were 10 Bcf gas remaining to be recovered. There are also probable reserves in the Bone Springs formation around 7300'.

"We are excited about this addition to our oil & gas portfolio and plan to acquire additional interests in this field. We believe there are several possibilities to recover additional reserves, such as perforating additional zones in the Wolf camp, re-completion in the Bone Springs and/or sidetracking of the well to the Morrow," said Jim Landrum, President, Golden Chief Resources.

ABOUT GOLDEN CHIEF RESOURCES:

Golden Chief Resources, Inc. is actively involved in the acquisition and production of oil and gas properties. GCHR currently has working interests in over 180 "producing" oil and gas wells in South Texas and South Louisiana. Located near the prolific "Glen Rose" formation, the company has a substantial interest in the JFS Property located in Dimmit County, TX. Its other major holding is the Kings Ridge Field in Lafourche Parish, LA, comprised of several producing wells in the mineral rich Mississippi River Delta Basin. These properties are estimated to have a Barrel of Oil Equivalent (BOE 10:1) of over 2.5 million barrels. "We produce oil and gas, we don't find it. We are not wildcatters. Our goal is to operate long-lived, long-term properties."

Where this statement includes "forward-looking" statements within the meaning of Section 27A of the Securities Act, the Company desires to take advantage of the "safe harbor" provisions thereof. Therefore, the Company is including this statement for the express purpose of availing itself of the protections of such safe harbor provisions with respect to all of such forward-looking statements. The forward-looking statements in this announcement reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ from those anticipated. In this announcement, the words "anticipates," "believes," "expects," "intends," "future" and similar expressions identify forward- looking statements. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereto. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this statement.

 

*** ABOUT GOLDEN CHIEF RESOURCES ***

Golden Chief Resources (OTCBB: GCHR), is a small developing growth company in the oil and gas business which currently produces oil and gas from its interest in two main properties, the JFS field in Dimmitt, Texas and the Kings Ridge field in LaFourche Parish, Louisiana. Each of these holdings is consistent with the Company’s goal of buying and improving production rates on proven, long-term producing properties. 
 
 

Producing Properties:

The JFS property, in which Golden Chief owns a 25% interest currently produces approximately 1.1 million cubic feet of natural gas per day. Engineering analyses completed by GCHR indicate that at least 7 billion cubic feet (bcf) of natural gas may yet be produced from this field. Seven billion cubic feet of natural gas has a market value of about $21 million in non-discounted dollars; furthermore, Golden Chief believes that several zones present in the field have yet to be exploited, specifically the Glen Rose Carbonate. If this formation were to prove productive, the cash flow discounted value of the property would climb to about $30 million… 

Advances in technology and a greater understanding of active reservoir mechanics have enabled older fields, such as JFS, to gain new life and to increase production of oil and gas. This is not only important to GCHR, but also important to our country as we renew our efforts to become more energy independent. 

The second major producer for Golden Chief is the Kings Ridge field in LaFourche Parish, Louisiana. Golden Chief currently owns a small working interest (3.75%) in this field and is moving forward with plans to increase that interest over time. Since this field was discovered in the 1970s, it has produced over 1.1 million bbl of oil and over 12 bcf of natural gas. The field was “shut-in”, or production stopped, in mid-1998 by the former operator due to the decreasing oil and gas production and high volumes of water produced with the oil and gas. ‘Produced water’ can be an expensive by-product of which to dispose, and the field’s production levels at that time did not justify the cost of disposing of all that briny water. 

Golden Chief, evaluated the Kings Ridge field and determined that with a little capital expenditure and some intelligent engineering, the Kings Ridge field could become commercially viable again. GCHR and its partners modified and updated the gas treatment equipment on the lease, added hardware to increase the ability of the gas to escape without extricating so much water, and successfully navigated the regulatory climate in Louisiana so that one of the older wells in the field could be used as a produced water injection well…thereby nearly eliminating the cost of off site water disposal. Golden Chief now re-injects the water back into the ground, not only saving on disposal costs, but resultantly driving oil and gas towards productive wells… 

Currently, the field is producing about 600 mcfgpd of gas and about 175 bbls of oil per day, selling only 150 mcf as the balance is used for gas lift on the oil zones... this would equate to approximately $4000 per day in gross revenues. More well ‘workover’ activities are planned to further increase production in the future. 

Growth plan:

Further plans include potential mergers and acquisitions with producing oil and gas companies that share similar strategies with GCHR, or with which Golden Chief's current production methods or planned activities would prove to be strategically synergistic. 

Golden Chief Resources, Inc. owns a 3.75% working interest in this project, and is currently negotiating for the acquisition of additional ownership interests. The Kings Ridge field consists of oil and gas leases covering lands in Sections 4, 5 and 9, Township 19 South, Range 23 East, Kings Ridge Field, Lafourche Parish, Louisiana. 

The wells are subject to 3 separate conservation units, which are:

9700 RA SU A Unit 175 acres 

KRG 9900 RA SU A Unit 482 acres (containing two proven development locations - Proposals to the first will come later in the year and a rework proposal is now being considered to complete a second saltwater disposal well in order that another well may be put on production). 

9900 RB SU Unit 397 acres 

The leases cover all depths and provide for an approximate 70% net revenue interest to the 100% working interest. The leases are located in the inland marsh area (shallow waters) of South Louisiana. The water around the wells is approximately 6' in depth. The wells and production facilities must be accessed by boat and barge through the various canals cut into the area for use by the oil and gas industry. 

The leases contain 7 wells, which consists of three (3) single completion wells, one (1) dually completed well, and one (1) saltwater disposal well. Also, there are two (2) wells that have been abandoned but not fully plugged. These wells are being held for possible future conversion as disposal wells. Following is a schedule of the wells: 

Production History:

Production was established from two of the subject wells, the Rutley-LBLD No. 1 and the Grandison Trust No.3, in early 1970. The other two wells, the LBLD No.1 and the State Lease 7501 No.2, established production in 1979 and 1993 respectively. These wells have produced from several zones, being the 9700' sand, the 9900' sand, a 10,060' sand, a 10,600' sand, an 11,000' sand, and the Rutley sand at 12,360'. Cumulative production from the 10,060' and the 11,000' sands are not readily available, but the remaining sands have produced in excess of 1.1 million barrels of oil/condensate and 12 bcf gas to date. 

Current Production: 

The wells produced on a continuous basis until mid-1998. At that time the wells were placed into a temporary productive status due to high water cut and the excessive costs incurred to transport and dispose of the produced water. In 1999 Alpine Exploration Companies, Inc. (along with Golden Chief and others) acquired the wells and leases. Remediation of the production facilities, placement of gas lift valves in the Grandison Trust No. 3-D well, and the conversion of the SL 7501 No. 1 well to a saltwater disposal well was completed in mid-2000 and the wells restored to continuous production. 

Field History:

The JFS (Edwards) Field of Dimmit County, Texas has produced 27 BCF of gas from the Edwards Lime and Georgetown Formations since its discovery in 1974, and in 1994 the field was shut-in due to a lack of gas treatment facilities to handle the H2S content of the gas.  At that time the field was producing about 750 Mcfgpd.  Subsequent measurements indicated increasing shut in pressures during the time the wells were not producing, it was apparent that the wells could be returned to production.

The field was returned to production in December, 1999 after installation of sweetening and compression facilities.  The Bowers lease currently produces approximately 1.1 MMcfd gas from five (5) wells.  Two of the wells have additional zones to be worked over, and another well is available to re-enter and return to production.  This should increase the production to around 2.0 Mmcfd.  The H2S gas is compressed and disposed of on lease into an injection well approximately 1100' from the plant site.

The project includes a 6½ mile pipeline system connecting to P G & E and the 15 acre plant site under a perpetual rental agreement which houses the dehydration, metering, and acid gas compression facilities.  The sweetening and sales compression equipment is leased from Hanover Services.

As our operating group is currently the only operator in the field and with the ownership of the majority of the surface facilities, this allows us to control the transportation and sweetening in the entire field area, should the project be expanded as is likely. Golden Chief Resources, Inc. currently owns a 25% working interest in this project.  To further and adequately develop the potential of the lease it may become necessary to reduce this interest in order to bring the needed financial resources to the project.

Current Field Status & Potential:

There are currently 7 unplugged wells on the Bowers Ranch lease; five (5) wells are productive of natural gas from the Edwards and Georgetown; one well is used for acid gas injection; and one well was recompleted above the Georgetown and flows water with a small oil cut.

In the existing wellbores, several of the productive horizons have not been perforated and in some cases, if perforated, may not have been effectively stimulated.  In the early development of the field, it was normal procedure to perforate all intervals in the Edwards, set a permanent packer above the top perfs, and acidize the entire interval in one job, dropping balls to attempt to divert the acid.  With a gross interval of up to 300', it is doubtful that all zones were effectively stimulated by a single acid job.

Nevertheless these productive wellbores have produced over 12.0 BCF of the 17.0 BCF that the Bowers Ranch portion of the field has produced.  Based upon a materials balance, assuming each of the wellbores is unaffected by offset drainage, there remains approximately 4 BCF to be produced from the producing wells, with at least another 1 - 5 BCF producible by completion in behind pipe unperforated intervals.  If one assumes that there is field wide depletion, as much as 7.0 BCF remains to be produced.  These figures are probably conservative if one extrapolates the increases in shut in pressure from 1996 to 1999 that shows a continuous slow buildup.

This buildup is more likely due to continued gas migration from undepleted areas of the reservoir.  The Edwards gas reservoirs in south Texas have normally required well spacing of 80 acres or less to effectively deplete their reserves.  Accordingly, we have attributed proved undeveloped reserves to eight (8) infill locations on the Bowers Ranch lease, assuming that the field would be 50% pressure depleted at these locations.  In the event that these wells encounter virgin pressure, a probable reserve category was estimated to result in the total reserves equal to the field average of about 3.0 BCF/well.  Even in this estimate, the 1600 acres comprising the Bowers Ranch that is held by production will only be developed on 120 acre spacing.

The project can also be expanded with the acquisition of the adjacent King lease, which has produced 10 BCF of gas from the Edwards 'A' porosity zone.  This lease was abandoned in early 1980.  At the end of 1979, the lease was producing over 1.3 MMCF per day.

The JFS (Edwards) Field at one time produced up to 25 MMCFD before being shut in in 1992. The rate of production required the installation of sulfur recovery facilities.  The appraisal contained herein includes a $500,000 capital expenditure to expand the facilities upon initiation of an infill drilling program.  The current equipment with additional compression can process as much as 5,000 MCFD of 5% H2S gas.

An internal reserve study indicates that a capital investment of $8.45 million could increase the discounted value of the JFS (Edwards) Project to over $30 million, based on conservative pricing and engineering parameters.

There is upside potential in the project in the Glen Rose reef section.  Two of the wells penetrated the Glen Rose, with one well off structure testing water productive, indicating presence of reservoir quality Glen Rose carbonates.  At a structurally higher position, the Glen Rose was penetrated, but was not sufficiently tested to confirm or refute the productive capability.  In an ongoing drilling program, it would be prudent to drill an additional 800’ to properly test the Glen Rose at a structurally advantageous position.
 
 

*** TRADING AT ALL TIME LOWS ***

Golden Chief Resources is a small developing growth company in the oil and gas business which currently produces oil and gas from its interest in two main properties, the JFS field in Dimmitt, Texas and the Kings Ridge field in LaFourche Parish, Louisiana. 

A recent announcement has indicated the company intends to acquire from Venture Energy in a stock transaction, 148 oil wells with the equivalent of 1.3 million barrels of recoverable reserves.

Golden Chief Resources trading at all time lows is poised for "breakout" on recent news and corporate developments.

Golden Chief Resources  has working interests in 2 prolific oil and gas fields in Texas and Louisiana producing a combined 1.7 mcf of gas and 200 bpd of oil. More importantly, these fields have a combined reserve capacity of over 10 billion cubic feet of gas and several hundred thousand bbls of oil. 

This translates to a "cash-flow" discounted value of over $40 million for the combined properties!  With a "market cap" of just over $1.5 million, Golden Chief Resources appears to be very under-valued. 

A)  Recently signed "Letter of Intent" to acquire Venture Energy including "working interests in 150 oil & gas wells and a "Barrel of Oil Equivalent (BOE 10:1) of 1.9 million barrels. 

B)  Management has over 100 years experience in oil & gas industry. 

C)  Current production of 1.7 mcf gas and 175 bbls per day. 

D)  Market valuation nearly 10 times GCHR's current market cap!!! 

E) New properties coming on line within the next several months. 

Disclaimer:  ALWAYS USE EXTREME CAUTION WITH RESPECT TO MICROCAP TRADING. A word or two about microcap and other low-priced issues trading:  this is a very volatile and precarious area of the market.  In the securities industry, it is generally considered that an exposure to this area of the market of more than 10 to 15 percent of one's portfolio was dangerous and foolhardy.  Although the potential for large gains is high, so is the potential for large losses. 

We caution you to always carefully weigh your exposure to this area of the market. If you do not receive the advice of a licensed securities broker, always keep in mind your tolerance for loss, and don't put yourselves in a position wherein that tolerance might be exceeded. 

Stay very diversified if you play microcaps. That way, you can benefit from the winners, and you won't get wiped out by one or two losers.  It is not unusual for a microcap to gain or lose 20% or more in one trading session.  This can give even an old pro near heart failure.  Your objective should be to capture good returns year in and year out.  If you can do that, you will probably be a big winner in the end.  If you gamble, you may well suffer the gambler's fate: Feast one day, and famine the next. 

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*** ADDITIONAL INFORMATION ABOUT GOLDEN CHIEF RESOURCES ***

HISTORICAL BUSINESS INFORMATION: 

The Company was incorporated in the State of Kansas on November 16, 1976, under the name of Art's Antique Autos, Ltd. The Company was dormant for several years and had no appreciable assets or revenues until 1981. On August 14, 1981, the Company changed its name to Golden Chief Resources, Inc. The Company's management discontinued business operations and liquidated the few assets of the company during 1986. The Company initiated a new phase in fiscal year 1998. Management filed the necessary documents with the State of Kansas to reinstate its existence. Effective August 25, 1998, the Company's status with the State of Kansas was reinstated and the Company remains in good standing and authorized to engage in business as a Kansas corporation. On March 5, 2001 the Company acquired a three and three quarters percent (3.75%) working interest in the Kingsridge Field located in Lafourche Parish, Louisiana effective April 1, 2001. Effective at a December 17, 2001 special shareholders' meeting the Company effected a one for ten reverse split of its common stock. On March 14, 2002 the Company announced it had entered into a letter of intent with Venture Energy, Inc. to acquire working interests in VEI's oil and gas properties in Louisiana, in exchange for GCHR common stock. 

MISCELLANEOUS BUSINESS INFORMATION: 

As of March 31, 2002, the Company had an accumulated deficit of $994,640 and a total stockholders' deficit of $695,459.

SIC Number: 1311
Fiscal Year End: 09-30
Industry: Energy
Transfer Agent: Fidelity Transfer Co.
CIK: 752391

For the most recent 10Q for Golden Chief Resources, Click Here
 

*** CONTACT ***

Golden Chief Resources Inc
406 Griffith Avenue
Terrell, TX 75160
Phone: 972-524-8215
James W. Landrum, PR/DIR
Michael McIlvain of Golden Chief Resources, Inc., 214-754-9162

Jay Shrewder of the Franklin Group for Golden Chief Resources, Inc., 1-888-743-2165, or email tfg1@cox.net 

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