Sledge Hamar 1-7 is a test well and drilling is expected to begin in the next two weeks with OP's drilling costs to be around US$150,000 on a turnkey basis.

In order to meet the costs of the program, and for working capital purposes, Orchard will carry out a private placement equivalent to 10% of the current issued stock.

The well will test structures with pre-drilling estimates of up to 20 million barrels of potential oil and gas reserves in Miocene Stevens Sands and Monterey fractured diatomites.

"Sledge Hamar provides OP with an opportunity to participate in the drilling of one exploration well this year and further complements the company's Monterey Shale program," said Orchard executive director Stephen Warrener.

Participants in the play are NEG (operator) 50%, Ivanhoe Energy 40% and Orchard Petroleum 10%.

Upon completion of the test well, OP will earn an interest in approximately 640 acres of prospect lands, limited to the total depth of the prospect well. OP will also earn an option to participate in a subsequent deeper test well under similar terms. This subsequent prospect well could also hold up to 10 million barrels of potential oil reserves from similar Stevens Sands.