The East Slopes Project

This page updated 01/13/12

Daybreak owns a 41.67% working interest in approximately 20,000 acres at the East Slopes Project, and has identified a number of exploration prospects yet to be drilled. Recent discoveries in the process of development include targets in the Vedder sands down to 3,000 feet in the northern portion of our acreage position; and the Santa Margarita, Etchegoin, and Olcese sands down to 2,000 feet in the southern portion of our acreage position. Daybreak has 3-D seismic over our entire acreage position, which is the first seismic ever shot in this particular area. We have 11 producing oil wells in the East Slopes Project.

Sunday Location
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 2,000 feet. During 2009 we drilled three development wells including one horizontal well. We are currently producing 56 barrels of oil per day (16 barrels of oil per day net to Daybreak). The Sunday reservoir has three proved undeveloped locations left to be drilled.

Daybreak owns an average of 38.57% working interest with a 28.3% net revenue interest in these four Sunday wells.

Bear Location
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 during May 2009. Production is from the Vedder sand at 2,200 feet. In December 2009, we began a development program, and by May 2010, we had drilled three development wells with plans to drill at least two more wells by the end of 2012. We are currently producing 49 barrels of oil per day (14 barrels of oil per day net to Daybreak). The Bear Reservior has three proved undeveloped locations left to be drilled.

Daybreak owns a 41.67% working interest with a 29% net revenue interest at this location.

Black Location
The Black property was acquired through a farm-in arrangement with a local operator. The Black location is just south of the Bear location on the same fault system. During January 2010 we drilled the Black #1 Well. The well was completed and put on production in January 2010. Production is from the Vedder sand at 2,150 ft. We are currently producing 8 barrels of oil per day (2 barrels of oil per day net to Daybreak). The Black Reservior has two proved undeveloped locations left to be drilled.

Daybreak owns a 37.5% working interest with a 29.8% net revenue interest at this location.

Sunday Central Processing and Storage Facility
The oil produced from our acreage is considered heavy oil. The oil ranges from 13° to 15° API gravity. All of the oil from the Sunday, Bear and Black locations is processed, stored and sold from this facility. The oil must be heated to separate and remove the 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. By having this central facility and permanent electrical power, it ensures that our operating expenses are kept to a minimum.

Dyer Creek Location
The Dyer Creek property is located approximately one mile north of our Bear locations on the same trapping fault. During October 2010, we drilled the Dyer Creek 67X-11 well to 2,294 feet and encountered 10 feet of oil pay in the Vedder sand at 2,284 feet. The Dyer Creek Reservior has one proved undeveloped location left to be drilled. There are abandoned production facilities on our lease left from a previous operator that we will utilize. We have completed the refurbishment of those facilities. The Dyer Creek 67X-11 well is being produced into these facilites, as well as any subsequent development wells.

Daybreak owns a 41.67% working interest with a 34.7% net revenue interest at this location.

Ball Location
The Ball property is located approximately one half mile north of the Dyer Creek Location on the same trapping fault. During October 2010 we drilled the Ball #1-11 well to 2,500 feet and encountered 15 feet of oil pay in the Vedder sand at 2,350 feet. The Ball Reservoir has two proved undeveloped locations left to be drilled. The Ball #1-11 well is currently being produced into the Dyer Creek Production Facility.

Daybreak owns a 41.67% working interest with a 34.7% net revenue interest in this location.

Bull Run Prospect

This prospect is located in the southern portion of our acreage position. The drilling targets are the Etchegoin and Santa Margarita sands located between 800 and 1,200 feet deep. We drilled an exploratory well on this prospect in December 2011 that was determined to be not viable for commercial production and the well was plugged and abandoned. Utilizing the data received from this well, we expect to drill another exploratory well on this prospect during 2012. Based on wells drilled by previous operators and our recently reprocessed 3-D seismic data, we estimate that the Bull Run Prospect has gross recoverable reserve potential of 2 million barrels of oil. The Bull Run wells will require a pilot steam flood and additional production facilities.