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Re: tuscadeep post# 21

Tuesday, 12/12/2006 5:11:29 PM

Tuesday, December 12, 2006 5:11:29 PM

Post# of 35
I welcome this dialogue.

In the William Rudolf’s letter to shareholders in the 2005 annual report, he states “The primary term of the lease between the Company and Meridian expired on December 15, 2005.” In his letter to shareholders for the six month period ending June 30, 2006, he states, “Due to the expiration of the lease agreement between the Company and its major Lessee [TMR] no delayed rental payments were due during the first half of 2006.” TMR has told me they are not drilling any new wells on BLMC land.

Nowhere does Rudolf say why the primary term of the lease was not extended. If there was a negotiation between TMR and the Company, it would appear that they could not come to terms. This is very curious given that both parties had access to the same 3D seismic data and given the fact that TMR has invested so heavily in i) completing 140+squares miles of 3D seismic ii) drilled several successful wells and iii) put in ~ 7 miles of pipeline. Given TMR’s investment in BLMC property, it would seem they would be in the best position to assess the data and try to generate incremental return on their existing investment rather than go someplace else.

The existing reserves of all operating wells on BLMC property are running down and this is being reflected in the revenue line as evidenced in the third quarter report 9/30/06: third quarter revenues of $2.7mm vs. $5.3mm for the third quarter 20005. Rudolf in his third quarter letter to shareholders states: “While we are keenly aware of the declining production rates of our older wells, we are encouraged by the execution of the two new Oil, Gas and Mineral Leases.”

I agree that two new leases are a positive thing. I also agree that Manti is a reputable company. But the latter two “positives” still do not turn BLMC into a value play. The
fact remains, that BLMC is not signing new leases at a rate to make up for the declining production despite the Company’s marketing efforts at NAPE.

As stated in my previous post, this does not become a value play until you can “prove” there is gas in the ground. Manti’s two new wells and further exploration efforts while positive steps is not evidence. At this point, putting a value on the future gas potential of the BLMC property beyond the current proven reserves is pure "speculation." If the results of the 3D seismic were to show significant gas reserves, then of course this could become a "value play" assuming the stock price did not appreciate to reflect the value of the known reserves.

What I am most interested in learning is the results of BLMC’s 3D seismic. I look forward to your continued comments.