Kern County, California
This page updated 10/13/16
The East Slopes Project is located in the southeastern part of the San Joaquin Basin near Bakersfield, California. Drilling targets are porous and permeable sandstone reservoirs that exist at depths of 1,200 feet to 4,500 feet. Since January 2009, we have participated in the drilling of 25 wells in this project. We have been the Operator at the East Slopes Project since March 2009.
Our 20 producing vertical oil wells in the East Slopes Project produce from five reservoirs at our Sunday, Bear, Black, Ball and Dyer Creek locations. The Sunday property has six producing wells, while the Bear property has nine producing wells. The Black property is the smallest of all currently producing reservoirs, and currently has two producing wells at this property. The Ball property also has two producing wells while the Dyer Creek property has one producing well. Our average working interest and net revenue interest in these 20 producing oil wells is 36.6% and 28.4%, respectively.
There are several other similar prospects on trend with the Bear, Black and Dyer Creek reservoirs exhibiting the same seismic characteristics. Some of these prospects, if successful, would utilize the Company’s existing production facilities. In addition to the current field development, there are several other exploratory prospects that have been identified from the seismic data, which we plan to drill in the future.
Sunday Central Processing and Storage Facility
The oil produced from our acreage in California is considered heavy oil. The oil ranges from 14° to 16° API gravity. All of the oil from our five producing properties is processed, stored and sold from the Sunday central processing and storage facility. The oil must be heated to separate and remove water to prepare it to be sold. We constructed these facilities during the summer and fall of 2009 and at the same time established electrical service for our field by constructing three miles of power lines. In 2013, we completed an upgrade to this facility including the addition of a second oil storage tank to handle the additional oil production from the wells drilled in 2013.
By utilizing the Sunday centralized production facility our average operating costs have been reduced from over $40 per barrel in 2009 to an average of approximately $12 per barrel of oil for the year ended February 29, 2016. With this centralized facility and having permanent electrical power available, we are ensuring that our operating expenses are kept to a minimum.
California Producing Properties
In November 2008, we made our initial oil discovery drilling the Sunday #1 well. The well was put on production in January 2009. Production is from the Vedder Sand at approximately 2,000 feet. During 2009, we drilled three development wells including one horizontal well: the Sunday #2, Sunday #3 and Sunday #4H wells, respectively. During May and June 2013, we drilled two additional development wells: the Sunday #5 and Sunday #6. We have a 37.5% working interest with a 26.1% net revenue interest (“NRI”) in the Sunday #1 well. For the Sunday #2 and Sunday #3 wells, we have a 33.8% working interest with a 24.3% NRI. In the Sunday #4H well, we have a 33.8% working interest with a 27.1% NRI. In both the Sunday #5 and Sunday #6 wells we have a 37.5% working interest and a NRI of 30.1%. Our average working interest and NRI for the Sunday property in aggregate is 35.6% and 27.0%, respectively. The Sunday reservoir is estimated to be approximately 35 acres in size with the potential for at least five more development wells to be drilled in the future.
In February 2009, we made our second oil discovery drilling the Bear #1 well, which is approximately one mile northwest of our Sunday discovery. The well was put on production in May 2009. Production is from the Vedder Sand at approximately 2,200 feet. In December 2009, we began a development program on this property by drilling and completing the Bear #2 well. In April 2010, we successfully drilled and completed the Bear #3 and the Bear #4 wells. In May and June 2013, we drilled three additional development wells, the Bear #5, Bear #6 and Bear #7, on this property. In November 2013, we drilled and put on production two additional development wells: the Bear #8 and Bear #9. We have a 37.5% working interest in all wells on the Bear property. Our NRI in the Bear #1, Bear #2, Bear #3 and Bear #4 wells is 26.1%. For the Bear #5, Bear #6 and Bear #7 wells our NRI is 30.1%. Our NRI in the Bear #8 and Bear #9 wells is 31.7%. The average working interest and NRI for the Bear property in aggregate is 37.5% and 28.7%, respectively. The Bear reservoir is estimated to be approximately 62 acres in size with the potential for at least ten more development wells to be drilled in the future.
The Black property was acquired through a farm-in arrangement with a local operator. The Black property is just south of the Bear property on the same fault system. The Black #1 well was completed and put on production in January 2010. Production is from the Vedder Sand at approximately 2,200 feet. In May 2013, we drilled a development well, the Black #2, on this property. We have a 33.8% working interest with a 26.8% NRI in all wells on this property. The Black reservoir is estimated to be approximately 13 acres in size with the potential for at least three more development wells to be drilled in the future.
The Ball #1-11 well was put on production in late October 2010. In June 2013 we drilled a development well, the Ball #2-11, on this property. Production on this property is from the Vedder Sand at approximately 2,500 feet. We have a 37.5% working interest with a 31.2% NRI in all wells on this property. Our 3-D seismic data indicates a reservoir of approximately 38 acres in size with the potential for at least three more development wells to be drilled in the future.
Dyer Creek Property
The Dyer Creek #67X-11 (“DC67X”) well was also put on production in late October 2010. This well is producing from the Vedder Sand and is located to the north of the Bear property on the same trapping fault. We have a 37.5% working interest with a 31.2% NRI in all wells on this property. The Dyer Creek property has the potential for at least one development well in the future.
California Drilling Plans
Planned drilling activity and implementation of our oilfield development plan will not resume until there is a sustained improvement in crude oil prices and additional financing is in put in place. No capital investments are currently planned within the East Slopes Project area in the 2016 – 2017 fiscal year.