buying, page-16

Major Upside!"Sugarkane"
Regional Play

Production, well log analysis and seismic has defined a trap in the Austin Chalk Total trap area ~ 200,000 acres

Major companies hold a significant proportion of the balance of the trap area


��Austin Chalk has produced 5TCF and 700MMBO from vertically fractured chalk in Giddings and Pearsall fields


��1930 –1970 vertical wells, mostly no stimulation



��1970 –1990 complete field coverage with vertical wells and fracs


��1990’s –horizontal re-development of the vertical drilled areas, high economic success based on better productivity and reserves


��Conventional Austin Chalk


��Has virtually no matrix porosity (~2%) –requires fracture permeability for productivity


��Is normally pressured and has low porosity


��In the vertical drilling phases only 20% of wells were successful due to the difficulty of hitting vertical fractures in vertical wells


��The economics of third stage conventional Austin Chalk wells are
better than for the Barnett Shale which is currently the major US producing formation.

Background to Austin Chalk


Background to Sugarkane Discovery



��The discovery well was drilled by Burlington 4 miles to the west of Sugarloaf and has been producing gas and condensate for the past year



��Both wells are central in a 50km x 20km+ trap where early structure on the Fashing Arch, formed by drape over the deeper Hosston structure drilled in the Sugarloaf-1), allowed migration of oil into the structure and preserved porosity


��Tight chalk forms the lateral seal all around the Sugarkane trap.


��Sugarkane gas-condensate discovery in the Austin Chalk has high porosity (6%+) and is overpressured


��Production, well log analysis and seismic has defined areas of interest in the Austin Chalk



��Sugarloaf-1 logs and shows identical to the Sugarkane discovery well

Reserve Potential -Sugarkane

��Additional information from expanded operations will be requiredin order to make firm estimates of reserves and economics

��Potential reserves have been estimated for the 200,000 acre "Sugarkane"field by TCEI.

��The field is expected to be developed with horizontal wells

��Total Sugarkane reserve potential in the Austin Chalk (upper zone of 3 –the 2 lower zones assumed as nothing for this calculation)
is more than 3TCF and approx. 500MMBC

��Based on these reserve and production assumptions, Sugarkane has better economics than conventional horizontal developed Austin Chalk and the Barnett Shale.