excellent report card, page-4

Timber I take the view that CA is something of an insurance policy for Neon in case things go pear shape (increasingly unlikely on what we know).So like you I consider it very important.

I have discussed CA with KC and here is a broad summary of what he has said.

NSA: there are now over 10 cyclic steam wells permitted and while that sounds alot there is a restriction on how much heat can be added to the reservoir each cycle. It literally takes a long time for the heat to build up in the reservoir which(I am sure you know but others perhaps don't)is whats needed to make the oil less viscous and therefore more transportable to the surface thereby increasing the bopd.

From figures based on Chevrons adjacent San Ardo efforts we should see rates exceed 500bopd for mature wells (our wells were over 100bopd on initial flows). But this will take time and no one seems to be able to answer what that timeframe actually is.

PV: This is in the lap of the gods as far as an anti oil government county is concerned. This is a definite requirement in terms of environmental reporting that Neon are working through but it seems to me a bit like us dealing with a problem with the tax department....it takes forever to get clear answers and therefore a clear path.

Paloma: I am told discussions continue with interested parties. It is interesting to note Vintage Petroleum(Oxy) are pressing on with one of their adjacent discovery wells permitted shortly after Neons initial discovery.

I suspect parties are luke warm about dealing with shale at such a great depth but thats my thoughts only. I could be very wrong.

Glau: Certainly looking interesting, if indeed it is another NSA then economies of scale ought to be good. Initial production may exceed 1000bopd if it follows NSA so we could get a spike in production for 12 months before this field also needs steam treatment. Areal views suggest this could be 50% bigger than NSA though I've yet to see any depth data. I suspect its similar in depth to NSA.