Palo Pinto Reef Prospect, Jones County, Texas.

A regional 3D seismic survey had identified a small Palo Pinto Pinnacle Reef. Because of an adverse landowner situation, the previous operator had elected to drill a Palo Pinto Reef test at an alternate location (Original Reef Well) that was slightly off the crest of the structure. Survey from Jones County TexasThe well potential tested 111 BOPD flowing. However, the well watered out after producing only 3000 BO. It was believed that the premature abandonment was the result of producing the well at high flow rates (in excess of 100 BOPD) and coning water.

The prospect concept was to redrill the reef at the optimum structural location and restrict the producing rate to approximately 35 BOPD, thereby maximizing ultimate recovery.

In 2004 ARI conducted a close spaced (330-foot) survey of the prospect area. The survey indicated a small hydrocarbon accumulation surrounding the crest of the structure that included a maximum of 10 productive acres. Considering on the survey results, ARI recommended the well not be drilled. Another operator drilled the well in mid-2005. In 18 months it has accumulated 2855 BO and is currently pumping 2.5 BOPD. The survey also identified another hydrocarbon anomaly on the Northern edge of the prospect area. That anomaly is off the Palo Pinto structure as identified by 3-D seismic and is interpreted as coming from the shallow Cook Sd which also produces in the area. That area has yet to be drilled.

West Texas Development Drilling.

During three years, several contiguous ARI surveys were conducted to assist in the selection of development well locations in a recently discovered West Texas multipay area. Survey from West Texas Channel Sand Several years prior to the initial survey a dry hole had been drilled in the southeastern portion of the prospect (DH2). A new field discovery well had been drilled west of the original dry hole (Well 1) and at the time of the first ARI survey had produced in excess of 50,000 BO.

The survey map page represents approximately 640 acres and includes only a portion of this continuing project. In this portion of the survey, five successful development wells and five dry holes have now been drilled. The dry holes were drilled based on other land and geological data and the results are consistent with those predicted by ARI. Please note the evidence of depletion surrounding Well No. 2, as evidenced by the reduced relative amplitude of the recorded signals mapped in the vicinity of that location.