COUNTY: HARDING LEGAL LOCATION: API NO: PERMIT NOsddenr.net/ogfiles/HARDING/4006320693.pdfYDil & Gas...

COUNTY: HARDING

LEGAL LOCATION: SWNE 35-18N-4E

API NO: 40 063 20693

PERMIT NO: 1949

WELL NAME: SPYGLASS STATE #7-35

OPERATOR: SPYGLASS CEDAR CREEK,

LP

PERMIT ISSUED: 08/04/2009

PERMIT CLOSED:

FILE LOCATION: 18N-4E-35 SWNE

TARGET CODES:

WELL HISTORY / CHECKLIST

PERMIT TO DRILL / INTENT TO DRILL

WELL INSPECTION / SCOUT REPORTS

OPERATOR’S TECHNICAL REPORTS / MAPS

ADMINISTRATIVE / SUNDRY REPORTS

CORRESPONDENCE

MISCELLANEOUS

WELL HISTORY / CHECKLIST

PERMIT AND BOND RELEASE CHECKLIST

WELL NAME: Spyglass: 7-35 State LOCATION: 18N-4E-35 SWNE, Harding County

PERMIT NO: (ci. e-f API NO: -1-( D 0 b 3 ""' 0(" 413

FORMSEIVED Application (Form 2)

J.P,rmit Fee of $100 YDil & Gas Leasing Agreement ✓f-ermission to Inspect Form 2i) & P Bond

Flat Map ,/1:c anization Report (Form 1) if not on file

C ificate of Negotiation (Form 9) rtification of Applicant

Surface Restore Bond

NOTIFICFTION OF PENDING PLICATION ‘/ State Archaeologist SD Dept. of Game, Fish Parks `4arding County Zoning Adm.

Fax 605-375-3318 REVIEW OF PERMIT APPLICATION

Surface casing program: t4hrough Fox Hills !adequate as stated Spacing requirements:

SHL: _meets statewide spacing _exception granted (Case # conforms to S_ • O 0 C

Field spacing

BHL: conforms to Order conforms to Field spacing

REVIEW OF PIT LINER VARIANCE _Plans and specifications sent to staff engineer

pproved _Disapproved _Variance granted _Variance denied 12 mil liner to be used as required by ARSD 74:10:03:13

PERMIT APPROVED ransmit check to Treasurer's Office with copy to our accounting personnel ype Permit #, API # and date on Application for Permit, have supervisor sign two forms.

_Prepare conditions to permit (O:\O&G\Reports\Apd\Conditions\ .doc) _Mail cover notice (O:\O&G\Reports\Misc Letters & Notices\OperPermitNote.doc), operator

/application, conditions, fee receipt; and pit liner application - if applicable Fax application copies to Harding Co. 605-375-3318 and the Anderson Reports

✓ Add to New Permits List (010&G/New Permits/NewPermit.doc) ✓ 'Add to API and Permit No. Lists (O:/O&G/Permits/API & Permit No.s/)

Add to Bond Lists (O:\O&G\Reports\Bonds\Bondbalance.xls & BondList.doc) ✓ dd to database and Web site

Prepare file folder following established labeling and order of material. File.

PLUGGING AND PERFORMANCE BOND RELEASE _Well Logs _Geologist's Report _DST Chart and Reports

Results of coring and core analyses

_Set of 10-foot sample cuttings-Vermillion Completion/Recompletion Report

_Plugging Report

SURFACE RESTORATION BOND RELEASE Approved Scout Report _Approved letter from Surface Owner

BOND RELEASE NOTIFICATION _Letter to bond carrier to release liability with copy to operator (O:\O&G\Reports\Bonds

\BondRelease.doc) _Enter information in Bond Lists (O:\O&G\Reports\Bonds\BondList.doc and Bondbalance.xls) and

database.

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PERMIT TO DRILL / INTENT TO DRILL

DEPA r 'TENT of ENVIRONMENT and NATURAL RESOURC Minerals a Aing Program - Oil & Gas Section

2050 West Main, Suite #1, Rapid City, SD 57702-2493 Telephone: 605-394-2229, FAX: 605-394-5317

GREAT FACES.;REATPIACES.

FORM 2

RECEIVED JUL 2 0 2009

DEPT OF ENVIRONMENT & NATURAL APEWI ON FOR PERMIT TO DRILL8ESOURCES - RAPID CITY

au trorm -

T , e of x ... Tr

. •i Tvpe of well:

New Wek e Ifrgr Orill Directional Well []Oil Well 171Gas Well Injection

Other e° R- dip ,1,

11/4 Other Lek

Nan an•4. . er4. 1A)c.NP „ - eV, ,pe ,- r: Telephone

Spyg eigr C , LP 595 S. Castell Ave., New Braunfels, Texas 78130 (830) 626-7100

Name and 4 $ .1 of Surface Owner:

Gilbert Angus Ranch P.O. Box 166, Buffalo, SD 57720

Name and Address of Drilling Contractor and Rig Number:

Elenburg Exploration Rig 8 1910 N. Loop, Casper, WY 82602

Surface Location of well: Qtr-Qtr, Sec, Twp, Rge, County, feet from nearest lines of section, and latitude and longitude (if available):

SW NE Sec 35, T18N-R4E, Harding, SD 1933'FEL, 1362' FNL, Lat 45 29' 01.65", Long 103 35' 38.28"

If Directional, top of pay and bottom hole location from nearest lines of section:

Acres in Spacing (Drilling) Unit Description of Spacing Unit

320 N/2 Sec 35, T18N-R4E

Well Name and Number

Spyglass State #7-35

Elevation

3014.5 GL

Field and Pool, or Wildcat

Faulkner Creek

Proposed Depth and Formation

2200' - Eagle/Shannon

Size of Hole

1) 9-7/8" 2) 3) 6-1/4 4)

Size of Casing 7"

4-1/2"

Weight per Foot 17#

10.5#

Depth 400'

2200'

Cementing Program (amount, type, additives) Depth 200sx Class G 2% CaCl2, .25#/si< to Celloflake, 100% excess surf 105 sx Lite, tail w/ 125 Class G plus to additives surf

Describe Proposed Operations (Clearly State all Pertinent Details, and Give Pertinent Dates, Including Estimated Date of Starting any Proposed Work). Use additional page(s) if appropriate.

Drill with fresh water mud to 2200'. 12 mil pit liner. Anticipated spud July 31, 2009.

I hereby certify that the foregoing as to any work or operation performed is a true and correct report of such work or operation.

Signature Name (Print) Title Date

FOR OFFICE USE ONLY

Approved B

Title: Oil and_Gas F.,uperviaor

Permit No. 1949 API No. 40 063 20693

Date Issued: August 4, 2009

Conditions, if any, on attached page.

GREAT EACES.GREATPLACES.

DEPARTMENT of ENVIRONMENT and NATURAL RESOURCES

Minerals & Mining Program Oil & Gas Office

2050 West Main Street, Suite #1 Rapid City, SD 57702-2493

Telephone: 605-394-2229 Fax: 605-394-5317

PERMIT CONDITIONS

Spyglass 7-35 State Permit: #1949 I8N-4E-35 SWNE Harding County API: 40 063 20693

Approval has been given to drill this location as detailed on the attached Application for Permit to Drill (Form 2) with the following additional conditions:

I. A 12-mil woven, reinforced high-density polyethylene liner will be used. 2. Surface runoff will be diverted around the drill site. 3. The surface hole will be drilled with fresh water. 4. Cement will be circulated to the ground surface on the surface casing. 5. Cement will be circulated back into the surface casing on the long string. 6. A cement bond log is to be filed if production casing is set. 7. If abandoned:

A. With long string, sufficient cement will be circulated to: 1. Squeeze approximately five sacks of cement into the perforations. 2. Place 100 feet of cement above perforations. 3. Fill casing with heavy mud. 4. Repair casing, if necessary, to hold a column of fluid. 5. Set 100-foot plug in the top of the casing. 6. Squeeze approximately five sacks of cement into the casing annulus.

B. Without long string, sufficient cement will be circulated to: 1. Set a 100-foot plug across the top of the Eagle formation. 2. Set a 100-foot plug across the base of the surface casing. 3. Fill the top 25 feet of the casing.

C. Heavy mud laden fluid will be used between all plugs. 8. A washed set of sample cuttings (or cores, if cut) is to be shipped to the state free of charge. 9. Please notify this office prior to plugging so a witness can be on location. After hours, call

Fred V. Steecc at 605.343.8617 or Mack McGillivray at 605.341.0207.

IFACES.GIIPIPLACES.




Telephone: 605-394-2229 Fax: 605-394-5317

NOTICE

1. Please notify this office with the SPUD DATE of the well as soon as possible. Our office hours are Monday through Friday, 8:00 a.m. to 5:00 p.m. MT. We can be contacted during office hours at (605) 394-2229.

2. Please notify this office 24 hours BEFORE proceeding to plug and abandon your test hole so that a witness can be present on location.

After hour telephone numbers are:

Fred V. Steece - (605) 343-8617 Gerald (Mack) McGillivray — (605) 341-0207

WELL LOCATION PLAT SPYGLASS, LP.

SPYGLASS STATE 7-35 SECTION 35, T18N, R4E HARDING COUNTY, S.D.

1362' FNL & 1933' FEL STONE N 89' 57' 29" W

1362'

— — — —I — SPYGLASS STATE 7-35 ELEVATION 3014.9' LAT. = 45' 29' 01 . 65 " LONG. = 105 35' 38.28"

Y-7,) 2635.97' 3 7-

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2-11 STONE

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JUL 2 0 2009

DEPT OF ENVIRONMENT & NATURAL 262 RESOURCES - RAPID CITY 9,ria

3 7 2. 7.-

STONE

iv , SCALE

1" = 1000'

I CERTIFY THAT THIS PLAT CORRECTLY REPRESENTS WORK PERFORMED BY ME OR UNDER MY RESPONSIBLE CHARGE, AND IS TRUE AND CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF

JOHN PAULSON R.L.S. 5014

DATE STAKED: 6-18-2009

BASIS OF VERTICAL DATUM: NAVD 1988

PERSON AUTHORIZING SURVEY; MIKE MCNAMARA

EXPLANATION AREA: NAD8X1996)

BASIS OF BEARING: ROTATED STATE PLANE

BROSZ ENCINFERINC BOX 357

BOWMAN, N.D. 58623 PHONE: 701-523-3340

FAX: 701-523-5243 PROJECT NO. 09-82

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SPYGLASS STATE 4.-35 SPYGLASS STATE 7-35

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SPYGLASS, LP. WELL LOCATION

SPYGLA 3 STATE 7-35 SECTION 35, T18N, R4E

HARDING C 1, SOUTH DAKOTA

RECEIVED

JUL 2 0 2009

DEPT OF ENVIRONMENT & NATURAL RESOURCES - RAPID CITY

SPYGLASS STATE 4-35

3

3010

SPYGLASS STATE 10-35

13o3i • oRmo+ •••••••• ww.ft 1.•■ =am. ow., lamp. ammmit •■■ ammw v./mo mwomo -

SPYGLASS STATE 7-35

RECEIVED

JUL 2 0 2009 DEPT OF ENVIRONMENT & tATURAL

RESOURCES - RAPID DM'

SPYGLASS, LP. WELL LOCATION

SPYGLASS STATE 7-35 SECTION 35, T18N, R4E

HARDING CO., SOUTH DAKOTA

CUBIC YARDS

CUBIC YARDS

TOTAL CUT: 695

TOTAL FILL: 0

Use excess materials in acess road fill

50' C 0.0' 100' C 0.0'

RECE VED JUL 2 i 2009

TOFENVIRON ENT & NATURAL RESOURCES- APID CITY

C 0.4'

C 0.8'

C 0.3

C 0.1

C 0.3'

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WELL HUD C 0.4'

15

PUMP

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50' I C 1.0' 100'

DE

SPYGLASS, LP. 1447 CRESTLINE DR.

SANTA BARBARA, CA 93105

DRILLING RIG LAYOUT SPYGLASS STATE 7-35 SECTION 35, T18N, R4E

HARDING COUNTY, SOUTH DAKOTA

ESTIMATED EARTH QUANTITIES

TOP—SOIL: 695 CUBIC YARDS SUB—SOIL: 0 CUBIC YARDS

Ground Elevation at Finished Rig Grade

ALL INDICATED CUTS & FILLS ARE STAKED GRADE ELEVA-TIONS. BACKSLOPES ASSUMED AT 1 1/2 : 1 %

Well Head: 3014.9 ft. ASL Elevation: 3014.5 ft. ASL

DRAFT: PAULSON I SCALE 1" = 30' I DATE: JUNE 18, 2009 .J PROJECT NO. 09-82

COMPANY

Name of company, organization or individual : Spyglass Cedar Creek, LP

Address : 595 S. Casten Ave., New Braunfels, TX 78130

Telephone number: (830) 626-7100 Fax Number: (830) 626-7107

Date Title

State of

Title Partner Date 6/29/2009

County of Co ma_ \ Subscribed and sworn to before e this L, day of

My Commission expires 2._A- cx.AJ..:7-.0\-

OT WRITE BELOW THIS LINE

Approved: Signature

DEPARTMENT of ENVIRONMENT and NATURAL RESOURCES Minerals & Mining Program - Oil & Gas Section


FORM 1

RECEIVE'

JUL 2 0 2009

DEPT OF ENVIRONMENT & NATURAL. RESOURCES - RAPID CITY

GREAT FAGS. GREAT MACES.

ORGANIZATION REPORT

ORGANIZATION

If re-organization, list previous name:

Type of organization: Limited Partnership State of incorporation: Texas

Date of registration with Secretary of State to do business in South Dakota: 03/14/2006

Name/Address of Registered South Dakota Agent: Jack Oberlitner, 2208 Lockwood, Rapid City, SD 57702

OFFICERS/PARTNERS/DIRECTORS (Use extra sheet if necessary) Name

Title

Address

Kevin Sellers

General Partner

595 S. Casten Ave., New Braunfels, TX 78130 March Kimmel

General Partner

9210 Autumn Leaf, San Antonio, TX 78217 Karen Christensen

General Partner

1447 Crestline Dr., Santa Barbara, CA 93105

SIGNATURE

/4' /,O

whose address is P 0 BOX 250, REf) LODGE, A47 -59068.

h lei natter called Lessee. pursuant to the provisions of SCCL ch. 5-7. DEPT OF ENVIRONMENT & NATURAL WI/NESSEft .,...., ,,,.... ' RCES - RAPID CITY 1. Granting Clause, In consideration of a bonus of $960, DO ciao's and the annual (entry' Of $40el.UU dOilaS, the

re t of which fa the first year of This tease is hereby acknowledged; and In consicieratkh of the covenants to be kept and p Mantled by the Lessee which are hereinafter set forttv.itie Lessor hereby teases to The Lessee, The mineral rands described as

OWe

County of 35, Township 0 78Niange 04E, Section 35: N2, SE (TdARDING) .

al number or acme more at lesse$80, for the $018 and only purposes of: exploring by geophysical and other methods,' mining, acing and operating for oti gas and cosingheaci go• laying of geese*: building tanks. Power stations. and other structures

ary to produce, save, care for. dispose of, and remove oil and gas; all In accordance with SDCL chs 5-7 and 45-9 and A SD ch. 4:01:01 and erne-Jo 74:10.

2. Z$2,272. This lease Is grophsid for c primary term of rive years from the dote of this agreement and as long thereafter c4 °IL gas, casingheod gas or any of iherro. is being commerciohy procitioaci from the land, subject to the terms and conditions sect forth In this lease, if ot. gas or casirignead gas is not being convivial* produced on the leased premises at The expiration O the primary term of this 'sate, but Lessee is actively engaged in deltIng a welt for all or gos, Men this lease shall continue in

a so long as the delft oporations are be continuously pursued on the leased promisee if all or gas is discoverea and p aced from a well which was being deied at the expiration of The primay term, the lease shall continue in face so long as of gaas or cosinohead gas is commercially produced.

.1 &lean The Lessee shoo pay r money to the Lessor during the full term Of this lease, a raYattY of celeesiehth free is oil costs and dedectiona an The oil produced from the wells under the lease. The Lessee shall also pay in money to the Lessor

ng the (us term of this ease a royalty of one-seshin, free of costs and deductions, on the gas produced from the weds under Is lease, whether the wens produce oil and casingheod as or gas alone. AN royalties shot be calculated upon the total

I produCed, saved and marketed under this lease based on the fair market vatue of oil or gas or casinghsod gas of like tile!' Prevoiling on The day The substance is sold

4. Mount Rental. This lease shall automatically terminate if cs well is not commenced on The leased property on or fore one year from the date of this agreement unless the Lessee on or before that dote pays or tenders to the Lessor the sum $480.00 donors, which shad operate as annual rental and allow Lessee the priviiege of deferring The commencement of a

tbr twelve months. The comrneecementrof a well may be further deemed ler successive annual perlacts during The primary term of the lease upon payment of MO annual rental.

S. lery hole Prgyiskee if. during the primary term of this !ease Lessee dells or at .andons a dry hole. or !falter the very of oil or gas the production cecces doe to any cause, this lease shall not terminate so long as Leases commences

dons!' dolling or reworiserg operatfons wheel 12 morn'hs offer abandonment or cesscreon or commences or resumes the yreent and tender of annual renters In the amount and manner provided above. Wee:is the resumption of payment of annuol

rentals this lease shall continue in Force as if there had been no Interruption In the rental payments.

::;ic

4. StuaL_GplAgiste. Upon annual written approval of Lessor. this tease shoii not expire at the end of its primary term Othere It cr well oCsxritee of producing gas In paying cerantlees aeon the leased rands wheel; has been shirt-!n due to the iroblPy

Lessee to olotain a pipeene connection or to market the gas from the wee However, in this event the Lessee shall pay c Out in as roycity equal to the annual rental paid by tne owner under the terms of Mislease In the same manner and dote of

the onnual rental payreent Is due. Th s payment of the shut-in gas royotty shall be considered fa all purposes the Seale as has was being produced in payee; quantities from the wek and upon the commencement of markettre; of the gat from the

II ut-rn vieft, the stoueln gas royalty paid for the lease year in which the gas is lust marketed shall be credited against the gas rbyaity paid to The Lessor for that year. The provisions of this section shad also apply where as Is being Marketed under tee lease. and through no foul of the Lessee, The pipeline connection or market Is lost or ceases. in which ease thisieose shall not 'sake so tong as the shuten gas royalty Is paid • •

e Poollna and Unitization. Upon receiving the written consent of the Lessor, tne Lessee stkethave Me right to cornmft the lands hereby leased to a unit pooling unit cooperative or other plan of cieveiopment or operation. -This commitment shall not change the percentage of royalties to be paid to the Lessor as riled in this lease. OS or gas or casinghead gas produced eom leased lands hdvded in a poceng or unitization conereeneve are considered to be foroduced under This lease

rB. aledireeinae. Upon completion of a commercially produced oil or gas w..4 upon the leased premise& the Lessee

seal proceed with reasonable diligence to dell such additional wells to the depth of the [emotion found commercially productive. or to such depth as may be necessary, to economically test develop and produce the deposits discovered.

9 Egatagatib2g. In =let:leafing at/ exploit:Won, nereng a &Xing operations ender this lease the Lessee shall at reasonable core and precautions in order to prevent the waste of oil and gas. The Lessee shall also at al times use

asonabie care and precautions to prevent The entrance of water into the oil or gas beefing strata or any destruction or kerry erWo

10 Laos Readreet The Lessee agrees to keep a correct log a eoch well drilled under this lease showieg the mations passed through. the depth qt which the formations were reached the Thickness of each formation the water

Soaring formations the number of feet of casing set in Me well and where placed, its Q.? and the total depth to which the well allied. Upon request 0 copy of This tog shall be provided Ta the Lessor.

11, ersaggiagpsytadigaw. goon request the LeeSee Shall file progress repterts with The Lessor before, The ceenpletiOn or abandonment of any well.

'

12. fereakeeseleesgreelegiemej. When the Lessee is required by the rules of the Board of Minerals and Environment r the Department of Erekonrnent and Natural Resaurcest, to file a well completion 'epee with That Department, the Lessee shot Iso tile one cope of mat report with the Lessor

for 11 Lesson Right to inspect Representatives of the Lessor shot at oil times have the right to enter upon the leased

premises for Me purpose of InspecOng and examining actMfles conducted under this lease. Representatives of The Lessor shall

rzisilereasonabie hours and upon reasonable notice have free access to and the right ft-. copy ali books accounts, records and of the Lessee insofar cis They may contain infoonollon relating to The production teen/reed under this ease. the price

Obtained therefore, and the fair market value of the production. Lessor shalt oleo have free access to agreements relating to production under this ease.

14. Sutheee Owners or Surface Lessees Rights. The Lessee agrees to provide the surface owner or surface lessee with a aian for the location cf ail facilities. and to consult with The surface Own./ or surface lessee regardne l a reasonable location for access roads Lessee agrees to interfere as Otte as possible with The use of the surface at the leased premises. The Lessee shall riot drill any well upon fhe leased Kinds within 200 feet of a residence or barn now or hen:after erected without The written consent of the owner Of the building. The Lessee hereby agrees to make satisfactory adoustment with the surface owner or Surface lessee for damages sustafned to them by reason of Lessee's entry uoon. Use. and occupancy of the surface of the land,

15. Pipeline Build Upon request by the Lessor, the Lessee shard bury its pipelines below plow depths. 7 6. A tcfleolOgical Malefic* The Lessor hereby reseves and retains tithe to any end all historical, archeoiogical. and

Paleontological materials found upon the leased premises, If the Lessee discovers a historical an;heoiogica, or pateontologicat Resource during its operation On ttas leased premises, the Lessee shall root disturb or alter It e resource. The Lessee shelf! notify the

SOUTH DAKOTA OFFICE OF SCHOOL AND PUBLIC LANDS 102 35&027382

Oft AND GAS LEASE Boiwaiie.212.

This Agreement Is made and entered into this 25th day of October, 2CC2 by MCI be/Wean the State of souRE6 E I V E D acting through Its Commissioner of School and Pub0c Lam* Pierre South Dakota, hereinciter referred to as Lessor, and

BLACKSTONE ENERGY INC. JUL 2 0 2009

• • •

• • •

• •

TT • d

LOT Lea soc8 WcITO:2I sooa sa oaf

State olSouth Dakota Commissioner Schots/Public Lands

On 10th obyniFebruary 220,31nasonifne. the undersigned officer, personally

Duane Estell.e known to me of selestbcforeY prover to be the person whose name Is subscribed toj

'edge tn Lit he executed the same for the purpose therein contained

info se my hand and office, I seal.

ail 25 n.,06 Notcm/Pub4C

Marilyn J. Wl<keham LEASE NUMBER 355L021382

Notary Public Ear the State of Montana Residing at Billings. Montana

orneared The within

inettnnegt_

In 4

e ' X

v

My cb

Aistromerts n see may assign This lease. senor in whole or as to any regu C.dIvisbn thereof erneracing forty acres or Male. to any aunt • id assignees with The prior written =prom! of Lessor,

IS argeachareaq. fie 'revisions of This lease may be amended onty by written agreement executed by tessor cra Lessee, to The extent provided by raw

a Lessee snail nose the right during any rental year upon tiny days written notice to the Lea to surrender and relinquish the whole or any /ego' sub-citvislon of the kinds hereby eased, and Thereupon o9 OlschOroed tram any Saltier obltatfin unaer The lease as to those lands.

20 cgatzeligars lt Li understood and agreed that The Lessor reseree.s the right to dachas!. &Is lease fbetited and o Cancel It upon faStre of the Lessee to fully discharge an the otetchans pro/iced in The 'nose. he Lessor shot provide Lessee with written notice of The cancellation. spec// n:nu 0 revered° time for Lessee to perform The undertaking or obrtgaHan with which Lessee IS ht ce /auk Upon written request the Lessee may hove a hearing before the Comm/steer of School & Pubic Lands on the alleged default. Pe provisions of This cancellation clause shot not In any way ripely to an automatic termlnalbri of this iease caused by Lessee failure to pay onnual rental when due.

21. 5.42890deltil2SIftsifibb. Opal the lerminolion or MIS 193.617 for an it cope, the Lessee 71W surrender possession or The teased premises to the Lessor. sub)ect to Lessee& light tO re-enter the leased premises of any Urns within slx months after the dote of tertninallbh fa the purpose of erncndng as macnInery, flidures Improvements Puddings and equipment belonging to Lessee, Any property of The Lessee not removed from the eased premises within six months of retrofit/non date of The lease Me at The sole option of Lessor. be deemed forfeited to Lester. Solid, hazardous or other waste products will remain the eec/usrve property of Lessee at all times

22 C.SeeltallTaltilefettiga222720120,S The ISMe agrees to COMO& wit: ail cippradble lows rules and reglicHans In effect at the dote or nib leoSe Ond which may from lime to nine be adopted, wnich do not (mock the °begetter of the contract or deprive the Lessee of on ex/sing propeSof tight recognized by low

23. teal:tau In The event Leper shag institute and prevail in any action or suit for the enforcement of any c f the provisions of the lease. Lessee MO pay to Lessor all attomeyS tees and legal costs incurred ln the action

24 bsigynalecatte. Lessee agrees to indemnify Lessor from any and at /Own CIOIMS =stet Lessor for JOSS injury r damage resulting Corn activates ef Lessee under this lease.

25 asadloaffidifttifalad Ai covenants and agreements heron set forth between The oodles, shot extend to onQl bind their suCcessom heirs etacutors. and Onions.

Sinned tills / day of 2003

102

ego &G aagetm4.

Signed this lOtizariO, February 2003

BLACKSTONE ENERGY, INC.

Lessee Duane Estelle, President

STATE OF MONTANA

couwycF YELLOWSTONE )/ Be.

Document prepared by: South Dakota Dept of School E Public Lands 500 E. Capitol Ave Pierre, SD 57501 (605) 773-3303

P10 03-18S

Record 3/3/03 1:30 P.M.

BookiBic pa e 59D-591

Crk,4a, Register of De Harding County PEE: $22.00 pd-ck

v- Recorded 1,-- Compared ✓ Grantor

Grantee „- Numerical

2T • d

LOIL92906d WdE0:2T 9002 62 pea

Document prepared by: Mr. Joseph Pope, Attorney-at-Law 1775 Sherman Street, #1375 Denver, CO 80203 Telephone: 303-832-5887

06-360 108 271 B0010lessesetalei

ASSIGNMENT OF LEASES

STATE OF SOUTH DAKOTA

COUNTY OF HARDING has. KNOW ALL MEN BY THESE PRESENTS: THAT

•

This Assignment of Leases, effective September 8, 2005, from GPE Energy, Inc., a Nevada corporation, hereinafter referred to as "Assignor", will:meaddress is 9800 Mount Pyramid Court, Suite 400, Englewood, CO 80112, in favor of Spyglass Cedar Creak, LP, hereinafter referred to as "Assignee% whose address is 353 East Mill Street, New Braunfels, TX 78130, is made pursuant to that certain Exploration and Development Agreement dated September 8, 2005 by and between Assignor and Assignee,

WHE1tEAS Assignor agreed to grant, bargain, sell, assign and convoy all of its right, title and interest in and to the real property, lands, and oil and gas leases set forth on Exhibit A, attached hereto, reference to which is hereby made for all purposes, including by way of example and not limitation, all leasehold interest, working interests, and operating rights presently held;

NOW THEREFORE, for and in consideration of the sum of $10.00 and more cash in U.S. currency and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor-does hereby grant, bargain, sell, assign and convey and does hereby grant, sell, assign and convey 52.5% of all of its right, title and interest in and to the real property, lands, and oil and gas leases set forth oaBxlaibit A attached, reference-to which is hereby made for all purposes, including by way of example and not limitation, all leasehold interest, working interests, and operating rights presently held, free and dear of any liens or encumbrances of any kind and without any additional royalty or overriding rcyalty, production payments, net profits interests or other burdens, similar or dissimilar, not of record prior to September 8,2005.

TO HAVE AND TO HOLD unto said Assignee, its successors- and-assigns, forever, in accordance with the terms and provisions of said leases, subjject.to the following reservations by Assignor of overriding royalty equal to the difference between existing burdens of record prior to September 3, 2005 and 19%.

It is understood and agreed that the reserved overriding royalty' nterest shall be maintained separate from the working interest of Assignor and shall not be considered merged therewith. Said overriding royalty reserved herein shall be treated as a lease burden existing on the effective date of the P-xpl 'ration and Development Agreement and the effective date of any operating agreement now existing or hereafter Greeted thereunder and shall not be construed as a subsequently cr eatcd interest and shall not be subject to reduction for any reason, including any increase in the royalty burden on the leases. Said overriding royalty shall be subject to the following terms and conditions.

1. Calculation of Overriding Royalties: The overriding royalty reserved herein shall be computed upon the basis of net proceeds at the well received for the oil and gas produced, saved and marketed from the land; or the market value at the well if not sold but used off premises, pursuant to said leases in the same-manner as provided for the payment of royalty in the oil and gas leases to which they are attached. Said overriding royalty shall be free of the cost of development, operations, transportation, compression, marketing, mann redwing and any and all other costs except applicable production, severance and other similar taxes. In the event the mineral interests subject hereto cover leas than the full interest in the oil and gas in said land, then the overriding royalty reserved herein shall be paid in the proportion that the interest in said mineral interest bears to the full and undivided mineral interest.

2. Extends to Renewals and Extension or Top Least The oveniding royalty reserved herein shall apply to any extension or renewal or top lease of the Mules al Interests subject

Assignment of Leases • Page 1 of 2.

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SURFACE USE AGREEMENT COPY This Surface Use Agreement (the "Agreemeirt") is made and entered into as of the 1- day of

February, 2008, by and between GratERT ANGUS RANCH, INC., and KAY E GILBERT end LINDA J. GILBERT, husband and wife, (the "Owner"), of POB 166, Buffalo, SD 57720, and SPYGLASS CEDAR CREEK, LP, (the "Operate?') of 595 South Castell Ave., New Braunfels, TX 78130.

RECITALS

A. Owrker owns and/or leases the surface estfte in the following described lands in Harding, County, South. Dakota the 'Property"):

'Tuscilsh-p 17 Nort tinge Section 1: Lutz 3, 4, SV2NWV4, SW'.4 Section 2: SWV4NWV4, S% Section 3: N%SE1/4, SE1/4SEV4 Section 4; EV1, SY-2NW1/4, N'hSWV4, SE1/4SWV4 Section 8: S1/41\1%, S'i‘ Section 9: .11!,29EN S1;7.NEY4, SqNWV4,, W&SIV1/4, SEY4SW!', WY2SE1/4, SE1/4SEV4, NE /,SBA/, Section 10: NVINEV4, NVANE%, SWANE1/4, SPANE1/4, NV2NW1/4, S'4NVA, N'ASW1/4, S'4SW1/4, SEV4 Section 11: INTE1/4NVA,NW1/4NWY4, SV2NWY4 Section 15: N%, INPASW1/4, SSWV4 Section 16: N'A, NY2SW1/2 Section 27: 1V3VVE Y4,11/4711%, W%SE1/4, E4SE*14 Section 18: NE%, MiSE% Section 20: NE'/NSA Section 21; INMAN-WI/4 Section 22: NV2NWY4

Ism/Ishii) 18 North, range AyalLyirim Section 11: SEV4 Section 12: S% Section 13: NEB/, NIVV4 Section 14: NE% Section 15: B% Section 21: NE3/4, NW1/4„ Section 22: NW1/4, NE1/4, S ,S. Section 23: All Section 26: SW1/4/%1W1/4,NWIASW1/4, B0/14, NNV1/4NW3/4, SWIASW% Section 27: All Section 28:NE1/4, E1/2SE1/4 Section 33: EV2E. Se.ction 34: All Section 35: N%, N1/4SW1/4, SEA

Containing 11,079.69 acres, more or less.

B. Operator has the ng,Dt to earn leases, and/or owns, leases, holds, or operates a portion of the mineral estate in the Property, and will be entering the Property to explore, develop, produce, transport, malice sell, or otherwise dispose of minerals, including without limitation, oil. gas and hydrocarbons (the "Minerale),

Rev. 2/20/0S Page 1

TERMS

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, and the payments hereinafter provided, the parties agree as follows:

1. Grant of Use. Operator may construct, use, maintain, repair and replace well sites, tank batteries, compressors, roads, pipelines and pewerlines on the Property as reasonably required by Operator for its operations on the Property. Operator agrees that prior to initiating any operations, Owner will be notified and good faith negotiations will be finalized prior to any construction, in order to Mitritill7P

interference with Owner's surface activities,

2. Compensation. Operator shall pay compensation to the Owner as follows:

a. Seismic: Five Hundred Dollars ($500) per mite online and Three Hundred Dollars ($300) per mile offline,

b. Well Site Payments:

One Thousand Dollars ($1,000) per well site up to one acre; any additional acreage shall be calculated at One Thousand Dollars ($1,000) per acre to be paid prior to commencing operations for the construction of each well site;

ii. One Thousand Dollars ($(,000) for each well site few each year that the Operatuir continues to utilizes well site for its operations. The first annual payment khan be paid to Owner on or before the first anniversary date from the date the well is spudded. Subsequent annual payments may be prorated for one or more years, but paid on or before said spud date anniversary, until the well is plugged and abandoned and well site reclamation operations have been completed.

ill, On surface owned by the State of South Dakota and leased under a grazing lease by the Owner, the Operator shall pay to the Owner a one-time access fee of Two Thousand Five Hundred Dollars ($2,500), and the well site payments set forth herein shall be paid fifty percent (50%) to the Owner and fifty percent (50%) to the State of South Dakota, pursuant to SDCL 5-17-17.1.

c. Roads:

Seven Dollars and Filly cents ($7.50) per rod for new road construction, with the distance being determined by survey, to be paid prior to commencing operations for the construction of the road_ However, there shat be O0 initial fee for roads existing as of the date of this Ageernent;

Annual road payments of Five Dollars ($5) per rod. The awns] road payments shall he made on or before the yearly anniversaries of this Agreement; and

To the extent possible and practicable, Operator shall use existing roads and trails for its operations.

I Pipelines:

Twelve Dollars and Fifty Cents ($12.50) per rod, with the distance being determined by survey, to be paid prior to commencing operations for the installation of a pipeline. The compensation shall be paid each time a pipeline is installed, even if the installation is over or next to an existing pipeline. if multiple pipelines are installed at the same time, then the compensation is limited to Twelve Dollars and Fitly Cents ($12.50) per rod. The Twelve Dollars and Fifty Cents (S12.50) per rod is to be paid

Rev. 2/20/08 Page 2

g.

each time the surface is disturbed to install pipelines, even if the disturbance is over an e: .51:111g pipeline. The compensation provided for herein shall apply to pipelines installed hereunder, and pipelines Stalled under any separate pipeline Easement and Right-of-Way Agreement;

L. Three Hundred Dollars ($300) for each above-groin-al metering facility, to be paid prior to installation of each facility. The Operator shall make a good faith effort to . plane metering facilities at the edges of the Property, if practicable;

iii. Three Hundred Fifty Dollars ($350) per milt for planted Cr growing crops, or bay land, to be paid prior to commencing operations for the installation of a pipeline; and

iv. if the seeding of the surface of the pipelines does not establish cover within 12 months of said seeding, the Operator shall re-seed the surface of the pipelines and pay the Owner additional damages of Two Dollars ($2) per rod- if the re-seeding does not establish cover within 12 months of the re-seeding, the Operator shall seed again, and shall pay the Owner another Two Dollars ($2) per rod, If the second re-seeding does not establish cover, the Operator shall have no fErtbiff obligation or liability to re-seed or make additional payments.

Rowerlines. Five dollars ($5) per rod, with the distance being determined by survey to be paid prior to commencing operations for the construction of a powerhne- All new powerlines shall be buried.

f. Compressors:

Two Thousand Five Hundred Dollars ($2,500) for each main compressor, and One Thousand Dollars ($1000) per acre, prorated for each booster compressor, unless the booster compressor tits within an existing well she, in which case there is no additional compensation for the booster compressor. A main compressor is a reciprocal compressor. All other compressors are screw compressors and are booster compressors; and

Two Thousand Dollars (?..2,000) for each main compressor for each year that the Operator continues to utilize the main compressor for its operations. Three Ilimdred Dollars ($300) for each booster compress-sot for each year that the Operator continues to utilize a booster compressor for its operations, unless the booster compressor fits within an existing well site, then no additional annual compensation is due for the booster compressor. The first annual payments shall be paid to Owner on or before the first anniveraary date from the date the compressor is placed in operation, and subsequent annual payments shall be paid on or before the subsequent yearly anniversary dates.

Fite Damage: If the Owner is not otherwise compensated for fire damages caused by Opc-rator's operations, Operator shall pay Owner Twenty-five Dollars ($25) per acre, and shall pay the costs incurred by all volunteer fire departments to fight the fire. However, if the ire damages are determined to be less than Twenty-five Dollars ($25) per acre pursuant to the Owner's settlement with any entity, the Operator shall have no per acre fire damage obligation- Operator shall prohibit any person on the property engaged in operations for Operator from smoking, except while inside a vehicle. Operator may not construct open fires on the property. Operator shall assure that all persons conducting operations for Operator have with them adequate fire suppression equipment

b. Extraordinary- Damage: The damage payments provided for herein are intended to cover normal and customary damages resulting from construction and operation of the described facilities. Should the Operator, or anyone claiming under it, cause any extraordinary loss, damage or destruction to the surface which is in excess of the reasonable, normal and customary damages contemplated by this Agreement, such as

Rev. 2/20108 Page 3

fire, injury to livestock, rounding up livestock, soil damage maned by spills, pipeline leaks, ruts or other damages caused by using the surface when muddy, or damage to fences, the Operator shall be responsible for repairing and restoring such damage, or compensating Owner for loss of value, of compensalint Owner for time and expense incurred by Owner as a result of such extraordinary damage.

i. Abandonment: Operator shall have the right to abandon any wellsitc, pipeline or road at anytime and upon reclamation, thereafter not be liable for any &hue annual fees on same.

Miscellaneous: Operator shall not permit any of its employees or contractors operating under this Agreement to bring any firearm, explosive device, weapon, alcoholic beverage, illegal drug, or animals ou Owner's property. Operator shall not place any trash, rubbish or debris on Owner's land. No employee or contractor of Operator shall hunt, prospect for fossils or niflgrrifes, consume alcoholic beverages, or carry on any illegal activities on the Property.

3. State of South Dakota Lan. If the Property includes surface owned by the State of South Dakota, and any compensation is due hereunder regarding such surface, payment of the compensation shall be subject to SDCL 5-747.1, if applicable.

4. Fencing- In the event Owner runs livestock in The area of a well site, then at the request of the Clines, the Operator shall fence the well site location with a 5-wire barbed wire fence, with a minimum of eight inch diameter corner posts and eight foot cross braces. Fence posts must be set one rod or less apart. If cattle guards are installed across roadways, a gate must be installed adjacent to the cattle guard of sufficient width to allow machinery, vehicle and livestock traffic. The fence shall be maintained by the Operator. Roadways and pipelines may not be fenced. Operator shall give Owner the first opportunity to bid on all fence Msesllarion.

5. jihad Easement. For roads, Owner hereby grants to Operator a non-exclusive twenty (20) foot wide easement upon, over, and across the Property for ingress and egress for Operator's operations on the Property. The easement shall be ten (10) feet on either side of the centerline of the roadway as laid out and o: surveyed, or as finally constructed, The Operator shs II control vehicle speeds an the roadways to safe and reasonable speeds. The roadways may not be used for hunting by the Operator or anyone claiming under the Operator. The Operator shall be solely responsible for maintaining the roadways. No scoria, clinkers, or oversized rock, shall be placed or left in road ditches.

6. pipeline Easement. :For pipelines, Owner hereby grants to Operator a non-exclusive fifty (50) foot wide easement upon, over, across and under the Property to survey, construct, install, maintain, and moan pipelines for use in Operator's operations on the Property. Operates- shall also use the easement to make inspections. The easement shall be twenty-five (25) feet on either side of the centerline of the pipeline as laid out andfor surveyed, or as finally installed Gates installed over pipelines shall be maintained by the Operator,

7. Pipeline Depth and Reclamation. The Operator shall bury all pipelines at least forty-eight (48) in des below the surface of the ground. Immediately after the installation. repair, or maintenance of a pipeline, the Operator shall restore, repair, and reclaim any damage caused to the Property. If any settling occurs after initial reclamation, then the Operator shall re-level the surface and re-seed if necessary. Operator shall remove all rocks unearthed as a result of pipeline installation, repair, or maintenance. Inning the installation of a pipeline, the Operator shall maintain the owner's existing fences.

8. rem. The term of this Agreement shall be for a period of five .:5) years from the date hereof, and as long thereafter as Minerals are produced from the Pi • perry by the Optuator. Further, this Agreement shall retrain in full force and effect until all reclamation work is completed and approved, and the Operator is released from responsibility therefore by the State of South Dakota. The term of this Agreement shall not apply to any separate pipeline Easement and Right-cf-Way Agreement.

Rev_ 2120■ 0 8 Page 4

9. Reclamation and Maintenance. Operator shall restore, re, air, and reclaim all Surface damages, including well sites and roads, caused by its operations, in accordance with all applicable state and federal laws, rules and regulations, including seeding. Seeding will be of the varieties reasonably recommended by Owner, as near a practicable. If requested by the Owner, the Operator shall leave roads in place. Operator shall keep all well sites, roads and pipelines free of trash and debris, and shall maintain the facilities in a neat and orderly manner

10. Fresh Water The Operator may not drill for or use any fresh water from the surface or sub-surface of the Property without the owner's consent, and such consent shall not be unreasonably withheld. It is possible that Operator may need a fresh water source for drilling °Potations. In this event, Owner will grant Operator the necessary nights to drill a water well on the Property, and Operator will pay Owner $2,5130A10 as consideration. Owner and Operator shall enter into a separate agreement providing' for Owner's reasonable use of the water, and also for Operator's full relinquishment of the well to Owner (at Owner's option] upon Operator's desire to abandon the welL

11. Water Disposal. The Operator may not cause or allow the disposal of any produced water on, in, or under the Property. The Operator may prepare pits during drilling, completion and/or reworking stairea of any well on said Property.

12. Assignment, •oth the Owner and the Operator may assign this Agreement. However, the Operator and/or its assigns may not make or allow additional use of any pipelines, roadways, or the easements therefore, without the express written consent of the owner.

11 Owner's the of_pronertiv. The Owner may use the Property for any and all purposes which do not interfere with the Operator's full enjoyment of the rights hereby granted.

lzt, Default and Forfeiture, The failure of Operator to make any of the payments herein provided for or to keep or prjorm any obligation tm its part according to the

terms and provisions of ibis

Agreement shall, at the election of owner, constitute an event of default. upon such event of default, Owner shall give to Operator a written notice of Owner's intention to declare a forfeiture of this Agreement and to terminate the same on account thereof, specifying the particular default or defaults relied upon by Owner. Operator shall then have thirty (30) days after receipt of such notice to contest, or to make good, or to commence to cure such default of defaults, in which event there shall be no keen-ore therefore. If Operator contests the existence of such default, it shall so advise owner in writing within thirty (30) days after eoceipt of the notice of forfeittn-e. In the event the parties are not able to resolve the dispute within thirty (30) days of the owner's receipt of the Operator's notice of contest, then either party may commence appropriate action in Court. If the determination of the Court includes a finding of default, Operator shall have the time specified in the Court decision to cure the default, or if riot so stated in the Court decision, then within sixty (60) days of the date of the Court decision. Upon &Rare to so cure raiddefault, owner may declare a forfeiture and termination of this Agreement. In the event of the termination of this Agreement, Operator till be under no further obligation or liability hereunder to owner from and after the date of such leunination, except for the performance of obligations including final reclamation, and the satisfaction of liabilities to Owner, or third parties, or respecting the Property, which have accrued prior to the date of such termiaaJon

15, Notices. Any notice, election, payment or other correspondence required or permitted hereunder shall be deemed to have been properly given or delivered when made in writing and delivered personally to the party to whom directed, or when deposited in the United States mail, postage prepaid, by regislered or cad mail, return receipt requffilea, and addressed to the party to whom directed as follows:

If to Operator: SPYGLASS CEDAR CREEK, LP-Attn: Kevin Sellers 595 S. Gated Avenue New 13rannfels, TX 75130

Rev. 2/20/08 Page 5

With a copy to

If to Owner:

Max Main, Esq. -Bennett, Main & Gubbnid, P.C. 618 State Street Belle Fourche, SD 5771.7 Phone No. 605292.2011 Fax No. 605.892.4084

GILBERT ANGUS RANCH, INC. RAY E. GILBERT and LLNDA I. GILBERT P O. Box 166 Buffalo, SD 57720

With a copy VI Ken Barker, Esq. Barker RI:Kan Law Firm P, 0, Box 100 Belle Fourche, SD 57717-0100

16. Lesser Interest, If Owner owns Or leases a lesser interest in the above-described Lsoric than the entire and undivided fee simple estate therein, then the payments herein provided for shall be paid to Owner only in the proportion which the Owner's interest bears to the whole and undivided fee estate.

17. Neutral Construction This Agreement and the wording contained herein accords with the negotiations of the parties. Accordingly, no provision hereof shall be ceesneci against rue parry or in favor of another party merely by reason of draftsmanship.

Short_krm Notice The parties may enter into a memorandum of this Agreement (Short Form) for the sole purpose of recordation in the Office of the Register of Deeds of the county in which the Property is located.

19. Entire Agreement and Amendment. This Agreement constitutes the entire agreement between the parties and supersede: all prior agreements and understandings, both written and oral, between the parhes with respect to the subject matter hereof This Agreement may only be amended, modified or supplemented by a written instrument signed by all the parties expressly stating than such instrument is intended to amend, modify, or supplement this Agreement.

20. Binding Nature. This Agreement shall be binding upon the parties hereto, their heirs, successors and assigns, and shall run with lands described.

21. Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall be considered one and the same document.

22. This Agreement Controls. In the event of any inconsistencies between this Agreement and any oil and gas 'easels) granted by owner, the terms of this Agreement shall controL

23. Indemnification and Hold Harmless. Operator hereby indemnifies and holds Owner and Owner's successors and assigns, harmless from any damage, loss liability, injury, or any claim therefore, to persons, property, natural resources and the environment, arising out of the use of exercise of the rights granted herein by the Operator or anyone claiming under it, including, but not limited to reasonable attorneys fees for any litigation to which the owner is made or threatened to be made a party.

Rev. 2/20/08 Page 6

OWNER:

GILBERT ANGUS RANCH, INC.

BY,

IN NI,TrNESS WHEREOF, the parties have executed this Agreement effect:ye as of the day and year first above written,

OPERATOR:

By:

SRMASS CEDAR CREEK, LP. —Th

C

Rev. 2/20108 Page 7


0 West Main, Suite #1, Rapid City, SD 57702-2493 ephone: 605-394-2229, FAX: 605-394-5317

EAT FACES.GREATPLACES.

FORM 9



CERTIFICATE OF NEGOTIATION WITH SURFACE OWNER/LESSEE

Gilbert Angus Ranch/State of South Dakota Surface owner/lessees

State 7-35 Well Name

18N 4E 35 Harding Township Range Section County

In accordance with SDCL 45-5A, I hereby certify that to the best of my knowledge and belief, an agreement regarding compensation for damages to livestock and surface land resulting from drilling operations on the described property has been or is being negotiated with the surface landowners or lessees, as listed above.

Spyglass Cedar Creek, LP Operator Name:

S' nature

Partner 0 7/02/09

Title Date

State of e County of CM rvva

Subscribed and sworn to before me this day of

(Seal)

, 20 13

Notary Public My Commission expires ( -c") \'O

e,.•\1.4.;;;;1% TONY M SELLERS '1 Notary Public, State of Texas

My Commission Expires

.......... January 24, 2010

EAT:jAITS CREATPLACES.

Y M SELLERS Notary Public, State of Texas

My Commission Expires ,,,,, ,,,,, January 24, 2010



FORM 8

RECEIVE)

JUL 2 0 2009


PERMISSION TO INSPECT

Well Name State 7-35

Township 18N

Range 4E

Section 35 County Harding

In compliance with ARSD 74:10:11:05 and SDCL 45-9, I do hereby grant the Secretary of the Department of Environment and Natural Resources, or his designated agent, permission to inspect all facilities, upon notification, at any time during the life of the permit or project.

Operator Name: Spyglass Cedar Creek, LP

Kevin Sellers

Partner 6/29/2009

Signature Name (print) Title Date

State of \ (Seal)

County of Cory‘al Subscribed and sworn to before me this c),1\-°t day of

My Commission expires (7-4-\3..NP\Q Notary Pub

FORM 13

RECEIVED

JUL 2 0 2009

STATE OF SOUTH DAKOTA DEPT OF ENVIRONMENT & NATURAL

BEFORE THE SECRETARY OF RESOURCES - RAPID CITY

THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

DEPARTMENT of ENVIRONMENT and NATURAL RESOURC ES Minerals & Mining Program - Oil & Gas Section 2050 West Main, Suite #1, Rapid City, SD 57702-2493 Telephone: 605-394-2229, FAX: 605-394-5317

GREAT FACES. C R EAT PLACES.

IN THE MATTER OF THE

)

CERTIFICATION OF APPLICATION OF Spyglass Cedar Creek, LP

)

APPLICANT

)

STATE OF Texas ) ) SS

) COUNTY OF Carnal

I, Spyglass Cedar Creek, LP , the applicant in the above matter after being duly sworn upon oath hereby certify the following information in regard to this application:

South Dakota Codified Laws Section 1-40-27 provides:

"The secretary may reject an application for any permit filed pursuant to Titles 34A or 45, including any application by any concentrated swine feeding operation for authorization to operate under a general permit, upon making a specific finding that:

(1) The applicant is unsuited or unqualified to perform the obligations of a permit holder based upon a finding that the applicant, any officer, director, partner, or resident general manager of the facility for which application has been made:

(a) Has intentionally misrepresented a material fact in applying for a permit;

(b) Has been convicted of a felony or other crime of moral turpitude;

(c) Has habitually and intentionally violated environmental laws of any state or the United States which have caused significant and material environmental damage;

(d) Has had any permit revoked under the environmental laws of any state or the United States;

(e) Has otherwise demonstrated through clear and convincing evidence of previous actions that the applicant lacks the necessary good character and competency to reliably carry out the obligations imposed by law upon the permit holder; or

Notary Public TONY M SELLERS

Notary Public, State of Texas My Commission Expires

January 24, 2010 My commission expires:

CERTIFICATE OF APPLICATE - FORM 13 PAGE 2

(2) The application substantially duplicates an application by the same applicant denied within the past live years which denial has not been reversed by a court of competent jurisdiction. Nothing in this subdivision mac he construed to prohibit an applicant from submitting a new application for a permit previously denied, if the new application represents a goodft:111h attempt by the applicant to correct the deficiencies that served as the basis for the denial in the original application.

All applications filed pursuant to Titles 34A and 45 shall include a certification, sworn to under oath and signed by the applicant. that he is not disqualified by reason °phis section from obtaining a permit. In the absence of evidence to the contrary, that certification shall constitute a prima facie showing of the suitability and qualification of the applicant. gat any point in the application review recommendation. or hearing process. the secretary finds the applicant has intentionally made any material misrepresentation (Oita in regard to this certification, consideration of the application may he suspended and the application may he rejected as providedfOr under this section.

Applications rejected pursuant to this section constitute final agency action upon that application and may he appealed to circuit court as provided for under chapter 1-26."

Pursuant to SUET 1-40-27, I certify that I have read the forgoing provision of state law, and that I am not disqualified by reason of that provision from obtaining the permit for which application has been made.

Dated this 29

day of June

2009

Applicant

Subscribed and sworn Mint me this 29 day of Juno 20 09

(SEAL)

PLEASE ATTACH SHEET DISCLOSING ALL FACTS PERTAINING TO SDCL 1-40-27 (1)(a) THROUGH (e).

ALL VIOLATIONS MUST BE DISCLOSED, BUT WILL NOT AUTOMATICALLY RESULT IN THE REJECTION OF AN APPLICATION.

SIllOdall IflODS / NOIIDadSNII IrlaAN

API Number: 40 063 20693

Permit Number: 1949 Operator: Spyglass Cedar Creek LP

Well Name: Spyglass State 7-35 Location Description: SWNE Sec 35 Twp 018N Rng 04E

South Dakota DENRMinerals and Mining Program523 East CapitolPierre, SD 57501Phone: (605) 773-4201 Oil and Gas Well Inspection Report

County: Harding

Arrival Time: 2:45 PM MT Departure Time: 2:48 PM MT

Accompanied By: Jeff Klenner

Equipment On Site: Wellhead, wellhouse

Routine-Oil Well

Routine-Gas Well

New Drill

MIT (Mechanical Integrity Test)

Final

Compliance

Landuse

Pass MIT

Fail MIT

Inspected By: Lucy Blocker

Comments

Wellhouse surrounded by cattle panels. Some worn grass present, probably due to cattle. Total flow meter present, but not active.

Dated 07/29/2019

Inspection Type

Mechanical Integrity Test

Time(Minutes)

Pressure inProduction Casing

Pressure inTubing

Pressure inSurface Casing

0

5

10

15

Production Casing Maintains 90%of Initial Pressure after 15 minutes?

Adequate Sign In Place? Yes

Tanks Adequately Bermed? NA

Evidence of Spill? No

Evidence of Improper Waste Disposal? No

Weed Problem at Site? No

Erosion or Settling Problems? No

Other Problems? Yes

Routine Inspection Items

Area Adequately Reshaped and Sloped? NA

Top Soil Replaced? NA

Adequate Vegetation Present? NA

Protects Ground/Surface Water? NA

Reclamation

Drill Pit Adequately Lined? NA

Blowout Preventer Used? NA

Terrain Suitable/Protects Surface Water? NA

New Drill

Signed

Inspection Date: 06/26/2019

4595

Other

Spyglass State 7-35

40 063 2069306/26/2019 4595

40 063 2069306/26/2019 4595

API Number: 40 063 20693

Permit Number: 1949 Operator: Spyglass Cedar Creek LP

Well Name: Spyglass State 7-35 Location Description: SWNE Sec 35 Twp 018N Rng 04E

South Dakota DENRMinerals and Mining Program523 East CapitolPierre, SD 57501Phone: (605) 773-4201 Oil and Gas Well Inspection Report

County: Harding

Arrival Time: 5:09 PM MT Departure Time: 5:14 PM MT

Accompanied By: Lucy Dahl (MM)

Equipment On site: well house

Routine-Oil Well

Routine-Gas Well

New Drill

MIT (Mechanical Integrity Test)

Final

Compliance

Landuse

Pass MIT

Fail MIT

Inspected By: Jeff Klenner

Comments

Well is shut-in and needs to be plugged or MIT'd. Well has no pressure gauges.

Dated 06/29/2018

Inspection Type

Mechanical Integrity Test

Time(Minutes)

Pressure inProduction Casing

Pressure inTubing

Pressure inSurface Casing

0

5

10

15

Production Casing Maintains 90%of Initial Pressure after 15 minutes?

Adequate Sign In Place? Yes

Tanks Adequately Bermed? NA

Evidence of Spill? No

Evidence of Improper Waste Disposal? No

Weed Problem at Site? No

Erosion or Settling Problems? No

Other Problems? Yes


Area Adequately Reshaped and Sloped? NA

Top Soil Replaced? NA

Adequate Vegetation Present? NA

Protects Ground/Surface Water? NA

Reclamation

Drill Pit Adequately Lined? NA

Blowout Preventer Used? NA

Terrain Suitable/Protects Surface Water? NA

New Drill

Signed

Inspection Date: 06/26/2018

4287

Other

Spyglass State 7-35

40 063 2069306/26/2018 4287

Well: Location:

API #: Permit #: Operator:

Type of Inspection:

OtherMIT

Final

Routine Oil Well Routine Gas Well

Date:

Comments

New Drill

Inspection Date: Time In: Time Out:

Accompanied by:

Equipment on Site:

Adequate Sign in Place?

Tanks Adequately Bermed?

Evidence of Spills?

Evidence of Improper Waste Disposal?

Weed Problems at Site?

Drill Pit Adequately Lined?

Blowout Preventer Used?

Erosion or Settling Problems?

Reclamation

Terrain Suitable/Protects Surface Water?

New Drill

Other Problems?

Top Soil Replaced?

Adequate Vegetation Present?

Protects Ground/Surface Water?


South Dakota DENR Minerals & Mining Program 523 East Capitol Pierre, SD 57501 Phone: 605-773-4201 Oil & Gas Well Inspection Report

Inspector:

Mechanical Integrity TestTime

(Minutes)

0

5

10

15

Pressure in Production Casing

Pressure in Tubing

Pressure in Surface Casing

Pass MIT

Production Casing Maintains 90% of Initial Pressure after 15 minutes?

Fail MIT

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Area Adequately Reshaped & Sloped Yes No NA

Landuse:

Signature:

Spyglass State 7-35 SWNE 35-18N-4E, Harding County

40 063 20693 1949 Spyglass Cedar Creek LP

Entire site is fenced with wire. Well house fenced in with cattle panel. No gauges present. Well needs working pressure gauges on both tubing and casing in accordance with ARSD 74:12:02:16. Well is no longer leaking.

Jul 25, 2017

07/17/2017 6:24 PM MDT 6:27 PM MDT

Jeff Klenner (DENR)

Wellhead, Well house

Lucy Dahl

Oil & Gas Well Inspection Report Photo—Spyglass State 7-35, Page 1 of 1

Photo 1. Spyglass State 7-35 wellsite.

Well: Location:


Type of Inspection:

OtherMIT

Final


Date:

Comments

New Drill


Accompanied by:

Equipment on Site:



Evidence of Spills?






Reclamation


New Drill

Other Problems?

Top Soil Replaced?





Inspector:


(Minutes)

0

5

10

15


Pressure in Tubing


Pass MIT


Fail MIT

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA


Landuse:

Signature:

State 7-35 SWNE 35-18N-4E, Harding County


The leak has been fixed and no more hissing can be heard. The well is still in need of working pressure gauges on the tubing and casing.

Jul 19, 2016

7/11/2016 9:48 AM MDT 10:02 AM MDT

Mike Lees (DENR)

well house

Jeff Klenner

Oil & Gas Well Inspection Report Photos—State 7‐35, Page 1 of 1

Photo 1. State 7‐35 well head.

Photo 2. Inside the State 7‐35 well house.

Well: Location:


Type of Inspection:

OtherMIT

Final


Date:

Comments

New Drill


Accompanied by:

Equipment on Site:



Evidence of Spills?






Reclamation


New Drill

Other Problems?

Top Soil Replaced?





Inspector:


(Minutes)

0

5

10

15


Pressure in Tubing


Pass MIT


Fail MIT

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA


Landuse:

Signature:



Entire site is fenced with wire. Well house fenced in with cattle panel. No gauges present. Well needs working pressure gauges on both tubing and casing in accordance with ARSD 74:12:02:16. Well is audibly leaking; small hissing sound inside well house, sounds like it's right near the wellhead. DENR staff contacted March Kimmel (Spyglass) and informed him that Spyglass needed to repair the well. We informed the Gilberts (landowners) that the well was leaking and that Spyglass was arranging to have the well repaired. Update (07/05/2016): Mr. Kimmel reports that the well has been repaired.

Jul 5, 2016

06/29/2016 9:43 AM MDT 9:50 AM MDT

Jeff Klenner (DENR)

Wellhead, Well house

Lucy Dahl

Oil & Gas Well Inspection Report Photo—Spyglass State 7-35, Page 1 of 1

Photo 1. Spyglass State 7-35 wellsite.

Well: Location:


Type of Inspection:

OtherMIT

Final


Date:

Comments

New Drill


Accompanied by:

Equipment on Site:



Evidence of Spills?






Reclamation Bond Release


New Drill

Other Problems?

Top Soil Replaced?





Inspector:


(Minutes)

0

5

10

15


Pressure in Tubing


Pass MIT


Fail MIT

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA


Landuse:

Signature:



No change from last inspection on 06/16/2015.

Jul 21, 2015

07/14/2015 12:06 PM MDT 12:10 PM MDT

Tristan Farel (New Frontier Energy)

Well house surrounded by gates

Lucy Dahl

Well: Location:


Type of Inspection:

OtherMIT

Final


Date:

Comments

New Drill


Accompanied by:

Equipment on Site:



Evidence of Spills?






Reclamation Bond Release


New Drill

Other Problems?

Top Soil Replaced?





Inspector:


(Minutes)

0

5

10

15


Pressure in Tubing


Pass MIT


Fail MIT

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA

Yes No NA


Landuse:

Signature:



Well had no gauges as required by ARSD 74:12:02:16. Total Flow meter was not working but you could hear the sound of gas running through one of the lines.

Jun 29, 2015

6/16/2015 2:02 PM MDT 2:05 PM MDT

Mike Lees

well house - surrounded by gates

Jeff Klenner

Oil & Gas Well Inspection Report Photo—Spyglass State 7‐35, Page 1 of 1

Photo 1. Spyglass State 7‐35 well site.

SdViAl / SI110da2l IVDINHDat S 4110IVIlad0

NO OPERATOR'S TECHNICAL REPORTS OR MAPS FOR THIS WELL

AS OF 8/3/2011

ADMINISTRATIVE / SUNDRY REPORTS

Spyglass Cedar Creek, LP

110 Broadway, Suite 215

San Antonio, TX 78205

RECEIVED MAR 2 8 2097


March 27, 2017

SUBJECT: Issues Identified During 2016 Well Inspections and Plans to Remedy Issues

Lucy Dahl

Environmental Scientist II, Minerals and Mining Program

523 East Capitol Avenue

Pierre, SD 57501

Dear Ms. Dahl-

Per our previous conversations, the other associated parties on our call/ communication chain are aware; there are still conflicted legal positions with Spyglass Cedar Creek, LP and New Frontier Energy/ Samyak Verra/ Tristan Farel et-al, and whose operational responsibility it is to provide remedies to all of the well/ field issues that have been identified in your December 14, 2015 inspection report. In spite of the legal questions, it is as discussed Spyglass' goal to bring the 40 wells into compliance, rehabilitate the field and bring the project back on-line as soon as is feasible. Understanding that we feel there are legal question regarding New Frontier; In order to try and move forward we intend to try and do the following in response to your assessment of issues:

1. Gilbert 1-2H: address well status, provide cement bond log, fix sign, replace fence around wellhead, fix reclaim pit, remove all unused equipment.

2. Price 13-24R: address well status, fix sign. 3. State 4-16: provide cement bond log, address well status, fix sign, rebury or remove pit liner at

surface, remove debris. 4. Gold Point State 32-1: address well status, provide cement bond log, fix sign, rebury or remove

pit liner at surface, re-set gates around wellhead. 5. State 10-27: address well status, provide cement bond log. 6. Peterson 6-5: address well status, install working gauges, remove all unused equipment. 7. !lett 8-24: address well status, install working gauges, fix sign. 8. State JO 6-27: address well status. 9. State 14-36: address well status, install working gauges, provide cement bond log, fence

wellhead, fix sign, remove unused equipment. 10. State 10-35: address well status, install working gauges. 11. State 13-23: address well status, install working gauges, provide cement bond log, correct

erosion issues. 12. State 11-30: address well status, install working gauges, provide cement bond log, fix sign. 13. Spyglass State 7-35: address well status, install working gauges, provide cement bond log. 14. State 2-27: address well status, install working gauges, provide cement bond log. 15. State 12-4: address well status, install working gauges, provide cement bond log. 16. Heairet-Henderson 10-15: address well status, install working gauges, provide cement bond log,

fix sign. 17. Gilbert 12-16: address well status, install working gauges. 18. Gilbert 13-10: address well status, install working gauges, provide cement bond log. 19. Gilbert 1-34: address well status, install working gauges, provide cement bond log, file

completion report. 20. Gilbert-State 3-16: address well status, install working gauges, rebury or remove pit liner at

surface. 21. State 16-22: address well status, install working gauges, correct erosion issues. 22. State 3-30: address well status, install working gauges, provide cement bond log, remove

unused equipment and refuse, berm tanks, repair building. 23. State 4-35: address well status, install working gauges, rebury or remove pit liner at surface.

24. Spyglass 16-24 Hett: address well status, install working gauges. 25. Gilbert 10-9: address well status, install working gauges, fix sign. 26. Gilbert 5-26: address well status, install working gauges. 27. State 16-8: address well status, install working gauges. 28. Gilbert 10-9: address well status, install working gauges, fix sign. 29. Gilbert 5-26: address well status, install working gauges. 30. State 16-8: address well status, install working gauges. 31. State 10-16: address well status, install working gauges, provide cement bond log. 32. State 8-8: address well status, install working gauges. 33. Gilbert 13-15: address well status, install working gauges. 34. Gilbert 5-15: address well status, install working gauges, provide cement bond log, rebury or

remove pit liner at surface. 35. Questar 9-27: address well status, provide cement bond log. 36. Peterson 10-5: address well status, install working gauges. 37. Gilbert 7-9: address well status, install working gauges. 38. State 1-21: address well status, provide cement bond log, rebury or remove pit liner at surface,

enable access to well house. 39. Fox 6-22: address well status, install working gauges, provide cement bond log, remove unused

equipment. 40. Gilbert 12-9: address well status, install working gauges, provide cement bond log. 41. State 2-16: address well status, install working gauges. 42. Heairet-Henderson 2-22: address well status, provide cement bond log, rebury or remove pit

liner at surface, correct erosion issues. 43. Acton 11-22: address well status, install working gauges, provide cement bond log, rebury or

remove pit liner at surface, correct erosion issues.

Understanding that this is the beginning of the wet season and not looking to cause further road or surface site damage; it is our intention to have the majority of this completed by early June.

Additionally, Spyglass Cedar Creek is currently in discussion with a well-financed, experienced operator to potentially bring in as a partner to get the project rehabilitated, bring the wells into compliance and get the field back on-line. They are in the due-diligence portion of the potential partnership and once the partnership is formed, they/we will move quickly to start rebuilding the project and start to again develop and produce the minerals. Concurrently, we will continue to try and clear up the legal issues with New Frontier Exploration, who has caused so many legal and financial issues for us, the land owners and the State.

We expect this partnership to be made in the next 30 days or so and then our work will begin. As soon as we memorialize our agreements I would like to schedule a meeting to see how we can work together to get this project back on track.

Although mostly created by groups/ people not under our control I do sincerely regret that this situation has caused so much trouble for everyone. I look forward to trying to rebuild this project and having a long-lasting, good relationship with you, and the State of South Dakota.

Manager

Xanthus Capital LLC

(General Partner to)

Spyglass, Cedar Creek, LP

Well Name API Location

Date of last

production

Necessary

Compliance

Actions

Gilbert 1-2H 40-063-20715 NENE-02-17N-01E

Never

Produced

Address well

status1; provide

cement bond

log; fix sign;

fence wellhead;

reclaim pit;

remove unused

equipment

Price 13-24R 40-063-20542.01 SWSW-24-19N-04E

Never

Produced

Address well

status1; fix sign

State 4-16 40-063-20605 NWNW-16-19N-04E

Never

Produced

Provide cement

bond log;

address well

status1; fix sign;

rebury or

remove pit liner

at surface;

remove debris

Gold Point State 32-1 40-063-20604 NWNW-32-19N-02E

Never

Produced

Address well

status1; provide

cement bond

log; fix sign;

rebury or

remove pit liner

at surface; re-set

gates around

wellhead

10-27 State 40-063-20609 NWSE-27-19N-04E

Never

Produced

Address well

status1; provide

cement bond log

Peterson 6-5 40-063-20621 SENW-05-17N-04E March 2010

Address well

status1; install

working

gauges2; remove

unused

equipment

Hett 8-24 40-063-20644 SENE-24-18N-03E

Never

Produced

Address well

status1; install

working

gauges2; fix sign

State JO 6-27 40-063-20657 SENW-27-17N-04E

Never

Produced

Address well

status1

State 14-36 40-063-20658 SESW-36-18N-01E

Never

Produced

Address well

status1; install

working

gauges2; provide

cement bond

log; fence

wellhead; fix

sign; remove

unused

equipment

State 10-35 40-063-20640 NWSE 35-18N-04E June 2012

Address well

status1; install

working gauges2

State 13-23 40-063-20659 SWSW 23-18N-04E

September

2011

Address well

status1; install

working

gauges2; provide

cement bond

log; correct

erosion issues

State 11-30 40-063-20692 NESE 30-18N-04E

Never

Produced

Address well

status1; install

working

gauges2; provide

cement bond

log; fix sign

Spyglass State 7-35 40-063-20693 SWNE 35-18N-04E June 2012

Address well

status1; install

working

gauges2; provide

cement bond log

State 2-27 40-063-20694 NWNE 27-18N-04E

December

2011

Address well

status1;

install

working

gauges2; provide

cement bond log

State 12-4 40-063-20701 NWSW 04-17N-04E May 2011

Address well

status1; install

working

gauges2; provide

cement bond log

Heairet-Henderson

10-15 40-063-20703 NWSE 15-17N-04E June 2012

Address well

status1; provide

cement bond

log; fix sign

Gilbert 12-16 40-063-20705 NWSW 16-17N-04E June 2012

Address well

status1;

install

working gauges2

Gilbert 13-10 40-063-20711 SWSW 10-17N-04E

September

2010

Address well

status1; install

working

gauges2; provide

cement bond log

Gilbert 1-34 40-063-20714 NENE 34-18N-04E July 2012

Address well

status1; install

working

gauges2; provide

cement bond

log; file

completion

report

Gilbert-State 3-16 40-063-20623 CNW 16-17N-04E July 2012

Address well

status1; install

working

gauges2; rebury

or remove pit

liner at surface

State 16-22 40-063-20660 SESE 22-18N-04E January 2012

Address well

status1; install

working

gauges2; correct

erosion issues

3-30 State 40-063-20611 NENW 30-18N-04E July 2012

Address well

status1; install

working

gauges2; provide

cement bond

log; remove

unused

equipment &

refuse; berm

tanks; repair

building

State 4-35 40-063-20614 NWNW 35-18N-04E July 2012

Address well

status1; install

working

gauges2; rebury

or remove pit

liner at surface

Spyglass 16-24 Hett 40-063-20620 SESE 24-18N-03E July 2012

Address well

status1; install

working gauges2

Gilbert 10-9 40-063-20622 NWSE 09-17N-04E July 2012

Address well

status1; install

working

gauges2; fix sign

Gilbert 5-26 40-063-20624 SWNW 26-18N-04E July 2012

Address well

status1;

install

working gauges2

State 16-8 40-063-20638 SESE 08-17N-04E June 2012

Address well

status1; install

working gauges2

State 10-16 40-063-20639 NWSE 16-17N-04E July 2012

Address well

status1; install

working

gauges2; provide

cement bond log

State 8-8 40-063-20641 SENE 08-17N-04E July 2012

Address well

status1; install

working gauges2

Gilbert 13-15 40-063-20642 SWSW 15-17N-04E July 2012

Address well

status1; install

working gauges2


Address well

status1; install

working

gauges2; provide

cement bond

log; rebury or

remove pit liner

at surface

Questar 9-27 40-063-20650 NESE 27-18N-04E July 2012

Address well

status1; provide

cement bond log

Peterson 10-5 40-063-20651 NWSE 05-17N-04E June 2012

Address well

status1; install

working gauges2

Gilbert 7-9 40-063-20662 SWNE 09-17N-04E July 2012

Address well

status1; install

working gauges2

State 1-21 40-063-20698 NENE 21-17N-04E July 2012

Address well

status1; provide

cement bond

log; rebury or

remove pit liner

at surface;

enable access to

well house

Fox 6-22 40-063-20699 SENW 22-17N-04E July 2012

Address well

status1; install

working

gauges2; provide

cement bond

log; remove

unused

equipment

Gilbert 12-9 40-063-20702 NWSW 09-17N-04E July 2012

Address well

status1; install

working

gauges2; provide

cement bond log

State 2-16 40-063-20704 NWNE 16-17N-04E July 2012

Address well

status1; install

working gauges2

Heairet-Henderson 2-

22 40-063-20706 NWNE 22-17N-04E July 2012

Address well

status1; provide

cement bond

log; rebury or

remove pit liner

at surface;

correct erosion

issues

Acton 11-22 40-063-20708 NESW 22-17N-04E July 2012

Address well

status1; install

working

gauges2; provide

cement bond

log; rebury or

remove pit liner

at surface;

correct erosion

issues

1: Well statuses should be addressed by: requesting temporary abandonment status from the

DENR based on the performance of a successful mechanical integrity test, returning the well to

production, or plugging and abandoning the well in accordance with Administrative Rules of

South Dakota requirements.

2: Valves and gauges must be installed and maintained in good working order to permit pressure

readings to be obtained on both casing and tubing.

December 14, 2015

March Kimmel


110 Broadway, Ste. 215


Dear Mr. Kimmel:

It has come to our attention that Spyglass Cedar Creek, LP (Spyglass) is addressing Bureau of

Land Management compliance issues concerning eight wells in Harding County, South Dakota,

that produce federal minerals. We want to remind you that Spyglass is the operator of record of

32 additional gas wells in South Dakota in addition to those eight that produce federal minerals.

As such, Spyglass is responsible for maintaining all 40 wells and ensuring they are in compliance

with South Dakota requirements. As we have advised you, or attempted to, on numerous

occasions over the past three years, all 40 wells are out of compliance and have been for quite

some time (see attached table).

We have been more than patient waiting for Spyglass to come to some kind of resolution on

these issues. However, our patience is worn thin and we now need to see some action on your

part. Failure to bring all 40 of Spyglass Cedar Creek’s Harding County wells into compliance

will force us to seriously consider enforcement. Possible enforcement actions include, but are not

necessarily limited to: requiring Spyglass Cedar Creek to permanently plug and abandon all

wells; revoking drilling/operating permits pursuant to SDCL 45-9-73; requiring additional bonds

sufficient to plug and reclaim each well site (which could amount to one million dollars or

more); levying monetary penalties up to $500 per day per violation (potentially tens of millions

of dollars); filing a lien against Spyglass Cedar Creek for costs associated with well plugging,

removal of equipment, and surface restoration; shutting down and sealing property by the

Secretary pursuant to 45-9-70; and requesting the Board of Minerals and Environment to act on

Spyglass’ bonds. To avoid enforcement we are requesting that you respond by January 31, 2016

with a plan outlining how and when you intend to bring wells into compliance.

If you have any questions or concerns you would like to discuss, please feel free to contact me at

605.773.4201.

Sincerely,

Lucy Dahl

Environmental Scientist II

Minerals and Mining Program

1

Well Name API Number Location

Date of last

production

Necessary

Compliance

Actions

State 1-2H 40-063-20715 NENE-02-17N-01E

Never

Produced

Fence wellhead;

reclaim pit;

remove unused

equipment;

provide cement

bond log;

address well

status1

Price 13-24R 40-063-20542.01 SWSW-24-19N-04E

Never

Produced

Address well

status1

State 4-16 40-063-20605 NWNW-16-19N-04E

Never

Produced

Provide cement

bond log;

address well

status1

Gold Point State 32-1 40-063-20604 NWNW-32-19N-02E

Never

Produced

Provide cement

bond log;

address well

status1

State 10-27 40-063-20609 NWSE-27-19N-04E

Never

Produced

Provide cement

bond log;

address well

status1

Peterson 6-5 40-063-20621 SENW-05-17N-04E March 2010

Install working

gauges2; weeds;

remove unused

equipment;

address well

status1

Hett 8-24 40-063-20644 SENE-24-18N-03E

Never

Produced

Install working

gauges2; repair

small leak at

wellhead;

address well

status1

State Jo 6-27 40-063-20657 SENW-27-17N-04E

Never

Produced

Address well

status1

State 14-36 40-063-20658 SESW-36-18N-01E

Never

Produced

Install working

gauges2; fence

wellhead;

remove unused

equipment;

provide cement

bond log;

2

address well

status1

State 10-35 40-063-20640 NWSE 35-18N-04E October 2011

Install working

gauges2; remove

weeds; repair

small leak at

wellhead;

address well

status1

State 13-23 40-063-20659 SWSW 23-18N-04E

September

2011

Install working

gauges2; correct

erosion issues;

provide cement

bond log;

address well

status1

State 11-30 40-063-20692 NESE 30-18N-04E

Never

Produced

Install working

gauges2; provide

cement bond

log; address well

status1

State 7-35 40-063-20693 SWNE 35-18N-04E October 2011

Install working

gauges2; remove

weeds; provide

cement bond

log; address well

status1

State 2-27 40-063-20694 NWNE 27-18N-04E

December

2011

Install working

gauges2; provide

cement bond

log; address well

status1

State 12-4 40-063-20701 NWSW 04-17N-04E May 2011

Install working

gauges2; remove

weeds; provide

cement bond

log; address well

status1

Heairet-Henderson

10-15 40-063-20703 NWSE 15-17N-04E April 2011

Provide cement

bond log;

address well

status1

State 12-16 40-063-20705 NWSW 16-17N-04E

November

2011

Install working

gauges2; address

well status1

3

Gilbert 13-10 40-063-20711 SWSW 10-17N-04E

September

2011

Install working

gauges2; provide

cement bond

log; address well

status1

Gilbert 1-34 40-063-20714 NENE 34-18N-04E October 2011

Install working

gauges2; remove

weeds; file

completion

report; provide

cement bond

log; address well

status1

Gilbert-State 3-16 40-063-20623 CNW 16-17N-04E

November

2011

Install working

gauges2; remove

weeds; address

well status1


Install working

gauges2; address

well status1

State 3-30 40-063-20611 NENW 30-18N-04E July 2012

Install working

gauges2; remove

unused

equipment &

refuse; repair

small leak at

wellhead; berm

tanks; repair

building;

provide cement

bond log;

address well

status1

State 4-35 40-063-20614 NWNW 35-18N-04E July 2012

Install working

gauges2; remove

weeds; repair

small leak at

wellhead;

address well

status1

Hett 16-24 40-063-20620 SESE 24-18N-03E July 2012

Install working

gauges2; address

well status1

4

Gilbert 10-9 40-063-20622 NWSE 09-17N-04E July 2012

Install working

gauges2; remove

weeds; address

well status1


Gauges; repair

small leak at

wellhead;

address well

status1

State 16-8 40-063-20638 SESE 08-17N-04E June 2012

Install working

gauges2; remove

weeds; address

well status1


Install working

gauges2; repair

small leak at

wellhead

provide cement

bond log;

address well

status1

State 8-8 40-063-20641 SENE 08-17N-04E July 2012

Install working

gauges2; remove

weeds; address

well status1

Gilbert 13-15 40-063-20642 SWSW 15-17N-04E July 2012

Install working

gauges2; remove

weeds; address

well status1


Install working

gauges2; repair

small leak at

wellhead;

provide cement

bond log;

address well

status1


Remove weeds;

provide cement

bond log;

address well

status1


Install working

gauges2; remove

weeds; address

well status1

5

Gilbert 7-9 40-063-20662 SWNE 09-17N-04E July 2012

Install working

gauges2; remove

weeds; address

well status1


Enable access to

well house;

provide cement

bond log;

address well

status1

Fox 6-22 40-063-20699 SENW 22-17N-04E July 2012

Install working

gauges2; reseed

site; remove

unused

equipment;

provide cement

bond log;

address well

status1


Install working

gauges2; provide

cement bond

log; address well

status1

State 2-16 40-063-20704 NWNE 16-17N-04E July 2012

Install working

gauges2; remove

weeds; address

well status1

Heairet-Henderson 2-

22 40-063-20706 NWNE 22-17N-04E July 2012

Provide cement

bond log;

address well

status1


Install working

gauges2; provide

cement bond

log; address well

status1

1: Well status should be addressed by: requesting temporary abandonment from the DENR based

on the performance of a successful mechanical integrity test, returning the well to production, or

plugging and abandoning the well in accordance with Administrative Rules of South Dakota

requirements.

2: Valves and gauges must be installed and maintained in good working order to permit pressure

readings to be obtained on both casing and tubing.

Enclosures

cc via email: Rich Williams, Assistant Attorney General

Ryan Brunner, Deputy Commissioner, Office of School and Public Lands

Donald Herauf, Bureau of Land Management

Shari Mills, Spyglass Cedar Creek

Kelsey Newling, Ground Water Quality Program

March 19, 2014

March Kimmel


1919 NW Loop 410, Suite 200


Dear Mr. Kimmel:

Spyglass Cedar Creek, LP is the operator of record of forty (40) wells in South Dakota and as such, is responsible

for the maintenance of the wells and ensuring they are in compliance with the Administrative Rules of South Dakota

(ARSD 74:12). All forty wells are out of compliance. We have made several unsuccessful attempts to contact you in

regard to these issues over the past two years and were forced to recover your surface restoration bond from the

Texas unclaimed properties department.

On February 16 and August 23, 2012, I sent you letters warning Spyglass Cedar Creek to bring certain of its Harding

County wells into compliance by temporarily abandoning the wells. On June 6, 2012, I sent you a letter outlining

well site problems documented during routine inspections. In September, 2013, department inspectors documented

weed control and equipment cleanup problems at 14 Spyglass well sites.

The 40 wells listed in the table below have not produced since July, 2012. Therefore, Spyglass must either

temporarily abandon (TA) the wells, return the wells to production, or permanently plug and abandon the wells.

ARSD 74:12:03:03 requires operators to obtain written approval from the secretary for the temporary abandonment

of a well. A successful mechanical integrity test (MIT) must be conducted before temporary abandonment status will

be approved for any Spyglass well. Notify us in advance of any MIT’s so we can have an inspector on site to verify

results. If you intend to temporarily abandon these wells, you must file a sundry notice including a request for such

status and information on the current condition of each well. If you intend to plug any of these wells, a plugging plan

must be submitted for approval.

On March 13, 2014 a follow up inspection was performed on the 5-26 Gilbert, to confirm a leak from this well had

been properly fixed. Pursuant to ARSD 74:12:04:11 a written follow-up report is required and must include any

procedures used to remedy the situation. A very small leak still exists on this well and should be monitored.

The well site problems identified in 2012-2014 are listed in the table below. See South Dakota’s Oil and Gas Map-

Based Data Source at http://www.sdgs.usd.edu/sdoil/oilgas_app.html to access inspection reports for details

regarding how these well sites fail to comply with the interim reclamation requirements of ARSD 74:12:03:07.

http://www.sdgs.usd.edu/sdoil/oilgas_app.html

Well Name API Location

Date of last

production

Well Site Compliance

Issues

State 1-2H 40-063-20715 NENE-02-17N-01E Never Produced

13-24R Price 40-063-20542.01 SWSW-24-19N-04E Never Produced

State 4-16 40-063-20605 NWNW-16-19N-04E Never Produced

Gold Point State

32-1 40-063-20604 NWNW-32-19N-02E Never Produced

10-27 State 40-063-20609 NWSE-27-19N-04E Never Produced

6-5 Peterson 40-063-20621 SENW-05-17N-04E March 2010

Unused equipment on

ground, weeds

Hett 8-24 40-063-20644 SENE-24-18N-03E Never Produced

State Jo 6-27 40-063-20657 SENW-27-17N-04E Never Produced

State 14-36 40-063-20658 SESW-36-18N-01E Never Produced

State 10-35 40-063-20640 NWSE 35-18N-04E October 2011 Weeds

State 13-23 40-063-20659 SWSW 23-18N-04E September 2011 No well sign

State 11-30 40-063-20692 NESE 30-18N-04E Never Produced

State 7-35 40-063-20693 SWNE 35-18N-04E October 2011 No lease information on sign

State 2-27 40-063-20694 NWNE 27-18N-04E December 2011

State 12-4 40-063-20701 NWSW 04-17N-04E May 2011 Unused equipment on site

Heairet-

Henderson 10-15 40-063-20703 NWSE 15-17N-04E April 2011

State 12-16 40-063-20705 NWSW 16-17N-04E November 2011

Well sign obscured by

vegetation

Gilbert 13-10 40-063-20711 SWSW 10-17N-04E September 2011

Gilbert 1-34 40-063-20714 NENE 34-18N-04E October 2011 Weeds

3-16 Gilbert-

State 40-063-20623 CNW 16-17N-04E November 2011

Weeds


3-30 State 40-063-20611 NENW 30-18N-04E July 2012

Unused equipment & refuse

on site

4-35 State 40-063-20614 NWNW 35-18N-04E July 2012

Weeds, no lease information

on sign

16-24 Hett 40-063-20620 SESE 24-18N-03E July 2012

10-9 Gilbert 40-063-20622 NWSE 09-17N-04E July 2012 Weeds

5-26 Gilbert 40-063-20624 SWNW 26-18N-04E July 2012

Well has a very small leak at

wellhead

State 16-8 40-063-20638 SESE 08-17N-04E June 2012 Weeds, debris at well site


State 8-8 40-063-20641 SENE 08-17N-04E July 2012 Weeds

Gilbert 13-15 40-063-20642 SWSW 15-17N-04E July 2012 Weeds




Weeds, unused equipment on

site

Gilbert 7-9 40-063-20662 SWNE 09-17N-04E July 2012 Weeds


Fox 6-22 40-063-20699 SENW 22-17N-04E July 2012

Ground needs to be reseeded,

unused equipment on site


Weeds, sign has fallen and is

obscured

State 2-16 40-063-20704 NWNE 16-17N-04E July 2012 Weeds

Heairet-

Henderson 2-22 40-063-20706 NWNE 22-17N-04E July 2012


Failure to bring all 40 of Spyglass Cedar Creek’s Harding County wells into compliance by requesting temporary

abandonment (TA) of the wells and addressing well site reclamation problems may result in enforcement action.

Possible enforcement actions the DENR may pursue include requiring Spyglass Cedar Creek to permanently plug

and abandon all wells, permit revocation pursuant to SDCL 45-9-73, monetary penalties up to $500 per day per

violation, and/or filing a claim against Spyglass Cedar Creek for costs associated with plugging, removal of

equipment, and surface restoration. You must respond by April 21, 2014 with a plan outlining how and when you

intend to bring wells into compliance with ARSD 74:12 in order to avoid possible enforcement action.

It has also come to our attention that Max Main is no longer your attorney or resident agent. Spyglass must designate

a new resident agent through the South Dakota Secretary of State’s office.

If you have any questions or concerns you would like to discuss, please feel free to contact me at 605.773.4201.

Thank you for your attention to these issues.

Sincerely,

Lucy Dahl

Oil and Gas Geologist

Minerals and Mining Program

cc via email: Roxanne Giedd, Deputy Attorney General

Ryan Brunner, Deputy Commissioner, Office of School and Public Lands

Donald Herauf, Bureau of Land Management

Shari Mills, Spyglass Cedar Creek

Tristan Farel, New Frontier Energy

August 23, 2012 March Kimmel Spyglass Cedar Creek, LP 110 Broadway, Ste. 215 San Antonio, TX 78205 Dear Mr. Kimmel: On February 16, 2012, I sent you a letter concerning the status of wells operated by Spyglass Cedar Creek, LP. that are located in Harding County, South Dakota. The wells listed in the table below have not produced for six months or more and must have their status addressed. There is no file documentation indicating that temporary abandonment was requested or approved. By ARSD 74:12:03:03, wells cannot be temporarily abandoned without approval. Assuming there are no mechanical integrity issues with the well, temporary abandonment will be approved for a period of one year unless a successful mechanical integrity test (MIT) is completed. Upon completion of a successful MIT, temporary abandonment will be granted for five years. If you intend to temporarily abandon these wells, please file a sundry notice including a request for such status and information on the current condition of each well. The alternatives are to return a well to production or plug and abandon the well. If you intend to plug any of these wells, a plugging plan should be submitted for approval. Well Name API Location Date of last production State 1-2H 40-063-20715 NENE-02-17N-01E Never Produced 13-24R Price 40-063-20542.01 SWSW-24-19N-04E Never Produced State 4-16 40-063-20605 NWNW-16-19N-04E Never Produced Gold Point State 32-1 40-063-20604 NWNW-32-19N-02E Never Produced 10-27 State 40-063-20609 NWSE-27-19N-04E Never Produced 6-5 Peterson 40-063-20621 SENW-05-17N-04E March 2010 Hett 8-24 40-063-20644 SENE-24-18N-03E Never Produced State Jo 6-27 40-063-20657 SENW-27-17N-04E Never Produced State 14-36 40-063-20658 SESW-36-18N-01E Never Produced State 10-35 40-063-20640 NWSE 35-18N-04E October 2011 State 13-23 40-063-20659 SWSW 23-18N-04E September 2011 State 11-30 40-063-20692 NESE 30-18N-04E Never Produced State 7-35 40-063-20693 SWNE 35-18N-04E October 2011 State 2-27 40-063-20694 NWNE 27-18N-04E December 2011 State 12-4 40-063-20701 NWSW 04-17N-04E May 2011 Heairet-Henderson 10-15 40-063-20703 NWSE 15-17N-04E April 2011 State 12-16 40-063-20705 NWSW 16-17N-04E November 2011

March Kimmel Page Two August 23, 2012 Gilbert 13-10 40-063-20711 SWSW 10-17N-04E September 2011 Gilbert 1-34 40-063-20714 NENE 34-18N-04E October 2011 3-16 Gilbert-State 40-063-20623 CNW 16-17N-04E November 2011

If you have any questions or concerns you would like to discuss, please feel free to contact me. Thank you for your attention to these issues. Sincerely,

Lucy Dahl Oil and Gas Geologist Minerals and Mining Program

April 24, 2012 Shari Mills Spyglass Cedar Creek, LP 1919 NW Loop 410, Suite 200 San Antonio, TX 78213 Dear Ms. Mills: The Minerals and Mining Program is in the process of updating oil and gas maps for the state. The Jumpoff Field has been defined as T17N, R3-5E and T18N, R3-5E for the purposes of tracking production data only. Please note that this determination has been made only for administrative purposes, and does not affect any board orders issued for the area. If you have any questions or concerns you would like to discuss, please feel free to contact me at 605.773.4201. Thank you for your attention to these issues. Sincerely,

Lucy Dahl Oil and Gas Geologist Minerals and Mining Program

SD EForm - 0439 V1 b,..,'ARTMENT of ENVIRONMENT and NATURAL RESOURCES

Minerals & Mining Program - Oil & Gas Section 2050 West Main, Suite #1, Rapid City, SD 57702-2493 Telephone: 605-394-2229, FAX: 605-394-5317

REvq VED

JUN 0 8 2010


WELL COMPLETION OR RECOMPLETION REPORT Type of Completion: ri Oil Well ,/ Gas

Name and Address of Operator:

Spyglass Cedar Creek,

Name and Address of Drilling

Rainbow Drilling

Surface Location of well: Qtr-Qtr,

SWNE Sec. 35 T18N

If Directional, top of pay and

Well Injection Deepen L Plug Back Workover Other

Telephone

(830) 626-7100

(if available):

LP 595 S. Castell Ave., New Braunfels, TX 78130

Contractor and Rig No:

P.O. Box 353 Evansville, WY 82636

Sec, Twp, Rge, County, feet from nearest lines of section, and latitude and longitude

R4R, Harding, 1362' FNL & 1933' FEL, Lat 45.48379167 Long -103.5934111

bottom hole location from nearest lines of section:

Well Name and No.

State 7-35

Field and Pool, or Wildcat

Faulkner Creek

Permit No.

1949

API No.

4006320693

Date Issued

8/4/2009

Spud Date

2/16/2010

TD Date

2/20/2010

Compl Date

3/5/2010

Elevation

3015

Total Depth (MD & TVD)

1,700

Plug Back TD (MD & TVD)

Producing Interval(s), this Completion, Top, Bottom, Name (MD & TVD)

Shannon 1586'-1594' Eagle 1515'-1546', 1570'-1575'

List Intervals:

No. of DST's Run

(see page 2)

Was Well cored'? FA No FlYes

Type Electric and Other Logs Run:

CPD, Array Induction, HVC

Date Directional Survey Submitted

CASING RECORD Re ort all strings set in well I lole Size Casing Size Weight (1b/ft) Depth Set Amount Pulled Sacks and Type of Cement Top of Cement

8 3/4" 7" 17Ib/ft 599' 157 sks G Surface 6 1/4" 4 1/2" 10.6Ib/ft 1700' 200 sks G

TUBING RECORD

LINER RECORD

Size Weight (1b/ft) Depth Set Packer Type & Depth Size Depth Interval Sacks and Type of Cement

PERFORATION RECORD Interval/Depth Holes Per Ft. Formation

Isolated Amount and Type of Cement used (indicate if squeeze cemented). Amount and Type of Acid and/or Sand used. Use additional page(s) if needed.

1515'-1546' 6 spf Eagle 1570'-1575' 6 spf Eagle 1586'-1594' 6 spf Shannon

Continued on Next Page —>

t( itle

V7/(0 Date

1A4a C J-1 b Name (Print)

Drill Stem Test Results Attached

If not attached, list Depth Interval Tested, Cushion Used, Time Tool Open, Flowing and Shut-in Pressures, and Recoveries.

Use additional page(s) if needed. I hereby certify that the information herein provided is true, complete, and correct as determined from all available records.

Well Completion or Recompletion Report — Form 4 Page 2

PRODUCTION Date First Production

03/10/2010

Producing Method (Flowing, gas lift, pumping - size and type of pump)

Flowing

Well Status (Producing or shut-in)

Producing

Date of Test

03/10/2010

Hours Tested 48

Choke Size

Production For Test --->

Oil (Bbls) Gas (Mcf)

79 Water (Bbls & %)

Oil Gravity - API (Corr.)

Flowing Tbg Pressure Casing Pressure 240

Calculate 24 Hour Rate -->

Oil (Bbls) Gas (WO

39.5

Water (Bbls & %)

Gas-Oil Ratio

Disposition of Oil (Purchaser and Transporter), and Gas (sold, used for fuel, vented, etc.)

Sold

Test Witnessed By

William Brence

List of Attachments/Comments

GEOLOGIC MARKERS FORMATION NAME AND BRIEF DESCRIPTION MEASURED DEPTH TRUE VERTICAL DEPTH

Eagle 1450'-1584' Shannon 1585'-1622'

Use additional page(s) if needed.

DRILL STEM TEST DATA

FOR OFFICE USE ONLY

Approved

"Fide: a eU: N I 4 2010

CORRESPONDENCE

DEN [ACES. GREAT PLACES.

July 21, 2009




Telephone: 605-394-2229 Fax: 605-394-5317

Stan Michals Department of Game, Fish and Parks 4725 Jackson Boulevard Rapid City, South Dakota 57702

Dear Mr. Michals:

The Department of Environment and Natural Resources has received three applications from Spyglass Cedar Creek, LP to drill new gas wells in Harding County. The legal descriptions for the wells are as follows:

NESW Section 30, Township 18 North, Range 4 East NWNE Section 27, Township 18 North, Range 4 East SWNE Section 35, Township 18 North, Range 4 East

Please direct your regulatory requirements to the operator as follows:

Spyglass Cedar Creek, LP 595 S. Casten Avenue New Braunfels, Texas 78130

I plan to issue the permits after July 28, 2009. If you have any questions, please do not hesitate to contact me.

Si eerely,

Fred V. Steece Oil and Gas Supervisor

July 21, 2009

GREAT FACES GREAT PLACES




Telephone: 605-394-2229 Fax: 605-394-5317

Michael Fosha Archaeological Research Center P. O. Box 1257 Rapid City, SD 57709-1257

Dear Mr. Fosha:

The Department of Environment and Natural Resources has received three applications from Spyglass Cedar Creek, LP to drill new gas wells in Harding County, South Dakota. The legal descriptions for the wells are as follows:


Please direct your regulatory requirements to the operator as follows:

Spyglass Cedar Creek, LP 595 S. Castell Avenue New Braunfels, Texas 78130

I plan to issue the pennits after July 28, 2009. If you have any questions, please do not hesitate to contact me.


DAT FACES. GREAT RACES.

July 21, 2009

eerely,





Telephone: 605-394-2229 Fax: 605-394-5317

Kathy Glines Harding County Zoning Director P. 0. Box 26 Buffalo, South Dakota 57720

Dear Ms. Clines:

The Department of Environment and Natural Resources has received three applications from Spyglass Cedar Creek, LP to drill new gas wells in Harding County. The legal descriptions for the wells are as follows:


I plan to issue the permits after July 28, 2009. If you have any questions, please do not hesitate to contact me.

MISCELLANEOUS

NO MISCELLANEOUS INFORMATION FOR THIS

WELL AS OF 9/8/2011

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