Lone Star Oil

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Ground Zero Prospect Howard Borden County,
Texas
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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. 2652
  Million barrels of oil recoverable using 4
  recovery factor. Clear Fork other formations
  could be developed vertically on 40s. 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 FingerCline 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

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Wolfcamp

• 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 cumd 43,000 BO

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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. EURs 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

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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 cums 400MBO/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 cums
  (400MBO)
• 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

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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

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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