Ground Zero ProspectGround Zero ProspectHoward & Borden County, TexasHoward & Borden County, Texas

Prospect Overview

• Midland Basin/Eastern Shelf Transition area – Howard & Borden Co. TX - 5 zones. 2 primary horizontal targets: Wolfcamp & Lower Leonard carbonate. Cline/Penn development South & East.

• 10,280 +/- acres on 3 ranches. 160 acre horizontal spacing. Room for 64 wells. 26–52 Million barrels of oil recoverable using 4% recovery factor. Clear Fork & other formations could be developed vertically on 40’s. Additional acreage can be acquired (10,000 acres+/-)

• 3 Primary Permian source shales (Woodford, Penn, Wolfcamp) underlie acreage and sourced large, nearby fields (Reinicke, Vealmoor, Vincent, etc)

• Repeatable, Multi zone, Hybrid Resource Play. Calculated Horizontal Reserves of 600-800 MBO per 160 acres in 2 zones. Proven consistent over large area (130+ miles). Analog wells 800-2000 BOPD.

• Thick sections of hydrocarbon saturation. Wolfcamp section is 750’ thick. Leonard 250’ thick, 2 Finger–Cline 300’ thick.

• Halliburton Shale Logs indicate almost 50% of column is high TOC, kerogen rich source rock• Correlative analog 120 miles away EOG, Approach, El Paso, Devon, Range & Pioneer. The recently

unveiled 2 Finger Shale(Cline) of Fisher County is present and productive in area. The 2500’ thick Clearfork, Leonard, Wolfcamp(WolfFork) column is analogous to Approach & Three Rivers activity in Irion & Crockett County

• Horizontals & multi stage fracturing provide massive increase in volume of rock connected to wellbore, thus providing economic, long term production of very low perm source rock

• Comparable in age & targets to very active Delaware Basin • Extensive E-Log review, Compelling Mud Log Data, proof of hydrocarbons., movable 40 gravity oil 1500 BTU

gas, heavy liquids. Excellent pipeline infrastructure. Ample water supplies• Apache, Chesapeake, SM Energy, Laredo, Nadel & Gussman and others actively leasing in vicinity

• 750’ thick lime, shale & sand mix. Depth 6400’-7200’• Halliburton Shale log analysis show appr 315’ (42%) of

column is kerogen rich, 3-5% TOC source rock. Limey, dirty carbonates sandwiched amongst source rock. Shale Log reserve calculations of 400 MBO per 160 acre tract

• Mud logs exhibit off scale gas increases going thru Wolfcamp. Carb & calc gas bleeding shale, fluorescence

• Extensive E Log analysis. Mud log characteristics correlate thru out study are and tie to production

• Collectively, 90% of column has produced in vicinity, with majority being from the “B” section. Newer completions include upper

• Type curve for 15-18 month vertical producers indicate 15-20 BOPD. Extrapolated by 4X for horizontal, provides economic 60-80 BOPD. Improved (larger) stimulations could provide even better rates.

• Historical WC producers 5-300 MBOE. One instance, 2’ of perfs cum’d 43,000 BO

• Wolfcamp

Lower Leonard

•250’ Thick Shaley, limey & sand mix. Depth 6030’-6280’

•Halliburton Shale Log analysis indicate 215’ of column to be kerogen rich, 2-5% TOC source rock. Carbonates sandwiched between dirty, shaley source intervals. EUR’s of 200-400 MBO per 160 acre tracts

•Mud logs show off scale gas while drilling thru interval with shows. Mud log gas correlates thru out study area & ties to production

•Several 50-90MBO wells in vicinity. Produces in Vealmoor & Reinecke Multi pay Field

•Might be excellent, tightly spaced, vertical project utilizing advanced petrophysical analysis & multi stage fracs

Other Targets

• Clear Fork: 3 intervals produce across region. Some high cums, Would Have (3.8+ MMBO), Coahoma, North (600MBO) and several 20-50 MBO fields

• Cisco/Canyon: Productive thru out region with some very high cum’s 400+MBO/well

• Cline Shale/2 Finger: Range, Laredo & Apache have horizontals 30 miles South. Apache completing interval near prospect acreage. Presently, 2 Finger acreage to East & SE trading feverishly with recent production tests. Possible Chesapeake/Devon target

• Strawn: Productive to the East. High cum’s (400+MBO)

• Mississippi: Produces in region. EOG has Horizontal Miss well, cum 700MM, 11 MBO, 2150 MCFD. Believe Chesapeake/Devon/Apache chasing Horizontal Miss

• Overall: A very oily petroleum system

Land Position

• Appr 10,280 acres under 3 ranches• Additional 5000-10,000+/- acres

available if pursued timely • 100% WI - 75% NRI • Oldest lease taken Nov 11’• Ample well water for frac operations

Conclusions• Major Permian source beds, long term production, high EUR fields within area, High Gravity oil,

high BTU gas- Heavy liquids

• Modern Shale Log analysis provide new insight & pinpoint productive zones

• Extensive E-log info, compelling, area wide, Mud Log Data

• Shale Logs indicate 2200’ of liquids rich, porous intervals and recoverable reserves of 4+ MMBO per section – PREMIUM ECONOMICS

• Improved petrophysical analysis, Core work, fracture identification, MicroSeismic, horizontals and multi stage fracs are breathing new life all across the Permian basin

• Extrapolated type curve provide for economic horizontal development of prospect

• Leonardian/Wolfcamp is equivalent to the Avalon/Bone Springs/Wolfcamp of the Delaware Basin.

• ClearFork/Leonard/Wolfcamp/Penn Analog correlates 120 miles south to EOG/Approach/El Paso/Devon/Range activity

• Wolfcamp & Penn/Cline both being developed horizontally to the South

• Relative shallow depth moderates drilling & completion cost. White/Ottawa sand can be utilized. Low HHP Frac Spreads. Est CWC $4.0 MM, possibly decreasing to $3.5MM

• Acreage Multiplier - Stacked pays offer substantial reserves across acreage block – A Very, very Oily area