COMPANY PROJECTS AND MATERIAL AGREEMENT TERMS
1) COVENANT MONDO
We agreed to:
- Participation in 3,986 net acres - 2 miles adjacent to Covenant Field
- Sevier County, Utah T22S-R1W - Overthrust Belt
- Legal ownership interest: We own working interest in the oil and gas leases which comprise the Covenant Mondo Prospect, subject to participation/contribution requirements on a well by well basis. Well is expected to Spud in early March 2015.
First Well:
- Working interest before tanks - 14%.
- Working interest after tanks - 11.6667%
- Net Revenue Interest - 8.9833%
- On same seismic and gravity data set as Covenant Field discovery.
- Drilled a dry hole. Second well currently drilling. Expected to be 800' hi to live oil shows in offset well.
- Navajo Sandstone - reservoir characteristics 12-15% Porosity, 100 mD permeability
- Terex has paid for a 14.00% working interest in first two wells; spudded first in 2014, resulted in a dry hole.
2) WATER DISPOSAL FACILITY
- Sioux County, Nebraska, T25N-R56W Sec. 13
- Legal ownership interest: Terex purchased 100% of the rights, title and interests to the properties located in Sioux County, Nebraska. 240 acres
- Letter of Intent subject to permitting for purchase of a well with 7 inch casing for a water disposal well.
- Current rates for water disposal are $1.65 per barrel. Disposal demand is very high.
- State of Nebraska - Approval from state of Nebraska for water disposal well expected March 2015.
- Surface use agreement negotiated for 5.00% royalty, 95% LNRI.
- Potential injection rates up to 15,000 BWPD.
3) COLE CREEK FIELD, WY
- Cole Creek Field located in SW margin of Powder River Basin, Natrona and Converse Counties, WY. Shannon sand reservoir is one of the main oil producing formations in the field.
- Legal ownership interest: Farmout Limited to one zone - Shannon Leases are held by production to other producers. We agreed to drill two Shannon Formation wells in the prospect area of the Cole Creek Unit under a Farmout Agreement within 24 months of September 30, 2014.
- There are up to 7 undrilled Shannon locations on the periphery of the field.
- Red Hawk owns 50.9% of the field and farmed out interest to our company on a 90/10 basis for 750,000 shares stock, 77% Net Revenue Interest
- Alpha Development owns 17.5% and Slawson owns 31.6% working interests.
4) DEVELOPMENT OIL WELL PROSPECT
- We acquired 240 acres, Sioux County, Nebraska, T25N-R55W
- Purchase of a producing oil well, that when initially drilled tested 24-30 BOPH from two different stratigraphic horizons. The well produced 30,000 barrels of oil and still produces intermittently. The
-7-
prospect is for two wells to be located in an updip direction structurally from the prior well that flowtested 720 BOPD from the Virgil Formation.
- The formation was damaged in the drilling and completion stages, and only produced a fraction of what it tested for.
- We have designed a drilling and completion program to prevent this formation damage from occurring.
- Executed Purchase and Sale for purchased 100% working interest and 75% NRI in the well and key acreage for $50,000 and 400,000 options @ $0.25 expiring September 30, 2017.
- There was no production from the wells in 2014.
5) BURKE RANCH UNIT
- Natrona County, Wyoming
- Dakota CUM Production = 5,551,000 BO to date - not currently producing
- Additional development locations can be drilled on 40 acre spacing (It has been developed on 80 acre spacing) and management believes downspacing represents significant potential upside.
- Mapped structural anomalies in the Tensleep and Frontier Formations represent additional exploration targets with potential reserves.
- Terex purchased Burke Ranch Unit for $400,000 and 400,000 shares of restricted common stock.
- Legal Ownership Interest: assignment of Unit/Leases
- Working interest inside the Unit - 100% - 1,920 gross acres - (Unit HBP) Shut In
- NRI inside the Unit - 80% - Working interest outside the Unit - 100% - 2917.00 gross acres - Various leases with terms expiring 1 to 3 years with renewal options
- NRI outside the Unit - 80%
- Total Acres - 4,837 gross
6) NIOBRARA/CODELL ACREAGE
- Legal ownership interest: none - prospects being sought
- Participation in Wattenberg Niobrara/Codell acreage that is in the heart of the known thermally mature Niobrara/Codell productive trend. The acreage has significant Niobrara and Codell potential, with 8-16 horizontal wells per section likely, surrounding local oil field development has demonstrated. Local wells
7) MILLER PROSPECT, KIMBALL COUNTY, NEBRASKA
(SUBJECT TO PARTICIPATION AGREEMENT)
- An agreement to participate in the drilling of two development wells in Kimball County, Nebraska. One offsets a J Sand Field that has produced oil and the other offsets several D Sand producers in an updip direction. Management believes the prospect represents low risk development wells in a prolific area of the DJ Basin. (40 Acres)
- Legal ownership interest:
Under the Participation Agreement we may earn as follows:
- Working Interest D Sand 100%
- Net Revenue Interest D Sand 87.5% - Working Interest J Sand 10%
- Net Revenue Interest to be earned by participation - J Sand 80%
