The creation of oil is exclusive to marine depositional environments. When marine organisms die their remains settle to the sea floor, at the same time the normal precipitation (settling out) of carbonates, and any other solids that are suspended in the water, mix with and cover the organic matter. The organic matter decays until all the free oxygen present is consumed, and at this point the decomposition stops. It is believed that these events must occur in anaerobic (oxygen depleted) stagnant areas where there is little water movement. Continued deposition results the compression and compaction of the sediment into rock. As well, other tectonic forces act on the rock, and it is compressed further. The compression by the weight of the rock above and the tectonic forces cause the temperature of the rock to increase, "cooking" the oil out of the sediments. The oil then migrates up through the rock until it is stopped by an impermeable layer. This creates a pool that can be drilled into and the oil can be extracted. Before an economically viable oil reservoir can exist four conditions must be met:

1) A source rock containing sufficient organic material must be present or be close enough for the oil to migrate to a collection area.

2) A reservoir rock (collection area) sufficiently porous or permeable enough to allow for storage and transportation of the oil (usually sandstone or limestone).

3) An impermeable rock must act as a cap rock (trap) to prevent further migration of the oil.

4) The creation of sufficient heat in the source rock to "cook" the oil out of the source. This is also known as thermal maturity.

The heavy oil of the Lloydminster area occurs as a result of contamination of the oil through contact with free oxygen (we breath free oxygen as opposed to the bound oxygen of H2O) and water. This degrades the oil making it tar like, and more difficult to extract and refine. These characteristics raise the input costs of production and make the heavy oil industry more susceptible to price fluctuations.

The average bore hole depth in the Lloydminster area is approximately 500m (1625 ft.). These bore holes are drilled into reservoirs in the Mannville Group of sedimentary rock which was deposited during the early through mid Cretaceous Period (the Cretaceous Period time frame is from 144-66 million years ago) Below Lloydminster there is a large expanse of geologic time missing from the rock record. Between the Mississippian and the Cretaceous age, this area underwent periods of erosion and/or periods of no deposition. In some areas rock from the Mississippian is completely missing, consequently, rock of the Cretaceous is directly overlying Devonian and in some areas Mississippian. This represents a gap in time of more than 175 million years.

Although Cretaceous rock formations are potentially oil producing this is not the case in the Lloydminster region. These rocks have not been subject to sufficient burial or tectonic forces to produce enough heat to "cook" the organic sediments. However, these rocks do perform an important function; they provide the reservoir rock from which the regions oil is extracted. The oil extracted in the Lloydminster region originates from source rock deposited in the Devonian and Mississippian periods.

The rocks most commonly associated with marine depositional environments are: sandstone, limestone, siltstone/mudstone, and shale. As well, salt (halite) and gypsum are often present in large quantities when sea water isolated from the ocean. or when a salt lake, is evaporated away. A sea transgressing onto to land produces what is called an on-lap sequence. Wave and tidal action along the coast sorts, through the action of the water, sediments, carrying away the lighter and smaller material, and leaving the heavier and coarser. The water action also breaks down the less resistant materials into the smallest particles possible and carries these away leaving the larger more resistant materials behind.

The two most common elements of the earth’s crust are oxygen (O) and silicon (Si), and when these two elements are combined under the proper conditions they create an extremely strong, weather and erosion resistant bond. SiO₄ is the chemical composition of sand. While the beach is forming, the lighter fine material is carried further out from shore and is allowed the settle out, depositing the materials that will eventually be lithified into siltstones, mudstones, and shales. Still further from the coast the depositional environment necessary for limestone exists. This sequence of sandstone, siltstone/mudstone/shale, and limestone is an on-lap sequence created by the transgression of the sea onto the land. Over time conditions change and/or events occur that cause the sea to regress creating an off-lap sequence, which, in ideal circumstances, would mirror the on-lap sequence.

Well sorted sandstone is highly permeable and provides an excellent transportation and storage medium for fluids. However, because mudstones, siltstones, and shales are microclastic (very fine grained), they are impermeable. Other barriers to oil transportation include formations of rock salt and gypsum rock. These are both affected by water, but because oil is both hydrophobic (does not mix with water) and less dense (floats on water) they can stop further transportation.

The diagram on transgressional and regressional seas displays quite clearly how oil could get to the surface, provided similar conditions existed in perpetuity. This is not the case, as illustrated by the fact that we are now 1000 miles from the sea. The angles in the diagram are exaggerated and actual occurrences are close to horizontal, and sediments are deposited on rock structures that aren’t. Geologic events, such as folding, faulting, erosion, and tilting can, at times, both contribute to and restrict the transportation of oil.

Beneath Lloydminster the rock below the unconformity is Mississippian and Devonian, and above is of the Mannville Group. The question of how the oil got from the source rock in the Dev. and Miss. to the upper strata of the Mannville Grp. is complex and difficult to ascertain. Evidence suggests that seams of rock salt were dissolved in and washed away by water. This caused the rock structure above to collapse on the rock structure below creating faulting providing transportational avenues that had not previously existed. These events occurred periodically before or during the pre-Cretaceous unconformity and continued through the Cretaceous Period. However, the Cretaceous rock has not completed the lithification process and is quite soft allowing the fractures to heal and destroying much of this evidence.

The fact that the rock has not fully formed would allow for an increased presence of free oxygen and water, which are credited with degrading the oil. The fact that heavy oil is so viscous that transportation requires such ideal conditions it must be concluded that the degradation process occurred at or very near the reservoir. There are other production problems that are not present in conventional crude processing. In conventional oil wells there is always one clear transition zone between the oil above and the water below. However in heavy oil wells a porosity change in the reservoir rock can prevent the oil present from rising further, this forces water to fill rock which the oil cannot reach creating a lens of oil rich sandstone completely surrounded by water saturated sandstone. Salt water, which flows easily through the sandstone, is a constant production headache.

Heavy oil requires a high grade reservoir in which the porosity of the rock exceeds thirty percent for the oil to flow naturally, and at this level the heavy oil does not flow fast enough for conventional extraction methods and enhancing methods, such as steam or solvent injection, must be used. The reservoirs from which oil can be extracted by conventional methods contain unconsolidated (loose) sand. This sand causes premature mechanical wear on pumping components and must be processed out of the oil and disposed of. As well, salt water, because it flows so much more easily than the oil, is often a production byproduct. Salt water is corrosive and contributes to mechanical wear and it damages piping and storage vessels.