Diversified Oil and Gas Holdings (DVFI)

[Imperial Whazoo]

Hey arch -
1st time we chat.

Heres the thing about the compressor (or what I know today). Hydroslotting apparently involves a proprietary downhole tool that involves high pressure (hence the compressor). Hydro means water. So, I suppose that the compressor is essential to make Hydroslotter's tool actually work. And what happens (probably) is that the well bore gets prepared, the new pipe laid in and punctured at the appropriate depths. Then they "probably" use relatively standard fracturing techniques used elsewhere in the industry to create some fractures where the seismic says they should. Then they drop in their tool and position it so as to jet high pressure liquids of some sort into the fractures. According to my file (I've printed out every article & press release I can find) on BIGN, Hydroslotting, WW, Tyche, Rubicon and so on, the key to hydroslotting is that the new "enhanced" fracture zones run VERTICALLY within the fractures PLUS.... and this is key..... the particulate matter that is typically a problem (because the flotsom & sand & rocks tend to clog up the holes in the casing)... the hydroslotting tool forces all the crud to extreem end points of the fractures and thus enables a better flow of hydrocarbons. Also, the enhanced fractures are deeper and they are vertical. And, the long precicted life of the reworked wells is directly attributable to the technique of forcing the clogging matrerial to the extreem end zones of the fracture.

Anyway, that is why it does in fact matter the Schlumberger and Hydroslot have a relationship that is inseperable.

Now, I'd seriously doubt that Baker Hughes or Grey Wolf or Grifco or whoever who competes with Schluberger in the rig and the proprietary tool arenas don't have compressors and rigs and so on. But, thats for management to decide. Lancaster & Bonhomme and their equivelents in each company is expected to make the best decision on relationships such as that between Hydroslotter & Schlumberger.

For my liking, I always like to have a Plan B, so I'm personally much more comfortable having Schlumberger as the primary but also going ahead and lining up alternative sources if possible. But, again, thats what management gets paid to do and we all should just be informed, but let them get about this unhindered.

I do think it might be something somebody might weigh in on... are there alternative sources for rigs equipped with compressors? If so who are thay? Anybody out there on the board know?

Now, if Schlumberger is the sole vendor with the necessary equipment, then BIGN & Hydroslotter are constrained by Schlumberger: Growth of slotted wells may actually be constrained by this situation and it may be that BIGN management needs to address this, explaining whether, if fact, the speed of doing wells is constrained by the necessity of scheduling that Schlumberger controls due to the fact that they are the only drilling contractor who has the necessary compressors. I'd be really surprised if nobody else could serve as an alternate source for rigs with the needed compressors.

As to your idea that BIGN would be best served by controlling its own fate by having both main rigs and thos=e rigs they will get if the Aug 31 LOI is successful, you are right on. If they had all their own equipment, it would be a dream situation because they would not have to arrange their pace of progress with Schlumberger being the constraining factor.

Imperial Whazoo