umiat oil field update no 4, page-16

Hi Daly,

I'm fine how are you. I don't smoke. The cash spent on this exercise was not good.

This drill season is an expensive failure in many respects but of course with every failure there are valuable lessons.
Having said that one would think reading some posts that this was the first oil well in the world that ever didnt turn out as people hoped. Drilling is a gamble and Umiat drilling even more so. Don't be shocked if the dice doesnt roll your way every time.

The Navy drilled many test wells in Umiat and a number of them didnt work, never flowed, and a couple worked pretty good. We still dont know why the perforations in #18 blocked at this stage, Linc tried to do something completely different to the navy wells in terms of design and it didnt work but probably for a different reason to the navys problems. They managed to get oil to flow to surface but the flow test was a failure.

Any exploration in Umiat is expensive, I think next season they better just aim for two wells. A new vertical well utilising the lessons learnt this time - i.e. open hole and dont move the rig until the flow test is complete so you can recomplete it with different design if necessary. Then once that vertical well is working try the horizontal well using the lessons learnt in the first well. They may only have time to get the one well done properly and tested in a season if they have no idea what is going to actually work and want to try multiple design options to optimise recovery.

This is not the first stock to have a bad day and it wont be the last. If it was me I would have done EOR in Wyoming to generate cashflow before i went anywhere near doing things in Umiat. The trouble is that AK government wont put a road in till someone proves the economic feasability of Umiat, so like i said - no pain, no gain as far as that asset is concerned.