Illinois Reef Prospect

We have a letter agreement to acquire a 25% working interest in ten off set wells located Fayette and Macon Counties. Plans are to shoot 3-D seismic on acquired leases in conjunction with seismic option agreements in order to confirm subsurface structures. Confirmation of structures will be followed by drilling. Targets range in depth from 2,000’ to 4,000’.

Illinois Reef Prospect

Characterization

U.S. Geological Survey (USGS) completed an assessment in 2007 of the undiscovered oil and gas potential of the Illinois Basin. The assessed area includes parts of the States of Illinois, Indiana, Kentucky, Missouri, Ohio, and Tennessee. The assessment is based on the geologic elements of each total petroleum system (TPS) defined in the basin. These geologic elements include the hydrocarbon source rocks, reservoir rocks, and hydrocarbon traps.

For the Illinois Basin, the USGS estimated the quantities of undiscovered, technically recoverable oil and gas resources as follows:

  1. a mean of 214 million barrels of oil,
  2. a mean of 4.65 trillion cubic feet of natural gas, and
  3. a mean of 24 million barrels of natural gas liquids.

The Ordovician Dutchtown to Galena AU has the greatest potential for undiscovered oil, with an estimated mean of 72 million barrels of undiscovered, technically recoverable oil. The Upper Silurian Carbonates (Reef) AU and the Middle Devonian Carbonates AU also have substantial potential for undiscovered, technically recoverable oil. The Devonian to Mississippian New Albany Continuous AU has the greatest potential for undiscovered gas, with an estimated mean of 3.79 trillion cubic feet of undiscovered, technically recoverable gas.

Proven Area

There have been 30 oil productive reefs discovered to date at an average depth of 2,296 feet. These wells average 3,834,025 barrels of oil. At today’s prices ($70), a well would have a production value of approximately $268 millions.

Drilling wells in the area are considered low cost due to the favorable leasing terms (NRI: 85% - 87.5%) and the shallow depth of the wells.