Manahuilla Creek Project
Goliad County, Texas

Economics

Net revenue lease	75%
Estimated initial production	3 - 5 Mmcf/d
Average gas price	$5.00/mbtu
Cost of first well	$600,000
Estimated life of the well	6 to 12 years
Potential Payout	$75 to$120 million per well
Number of wells	8 - 10

Manahuilla Creek Project
Expanded Yegua Trend, Goliad County , Texas
Drilling Activity

The proposed drilling area is targeting the “Expanded Yegua Trend” which is a prolific overpressured gas-condensate trend in the Middle Eocene of the onshore Gulf Coast Basin. In the early 1980s, thick, highquality sandstones were discovered downthrown to Yegua expansion faults at the inferred shelf margin. Total gas production to date in this formation exceeds 800 BCF, with an estimated ultimate trend recovery close to 2 TCFG.

GEOLOGY
Prograding Complexes or Lowstand Deltas — Prograding complexes form by deposition of sand and mud at the mouth of river systems during lowstands of relative sea level. They occur in water of shallow to moderate depth. In general, they result from point-source deltas or fan-deltas, although very strike elongate barrier-bar/strand-plain sandstones also occur. Substantial amounts of slumping into deeper water are common. Most of the larger fields to date in the Expanded Yegua Trend produce from sandstones in the prograding complex.

Middip Incised Channel Deposits – Rivers make valleys during lowstands of sea level. These valleys are the sites of complex deposition during an ensuing rise in sea level. One or more levels of fluvial channel sand are frequently estuarine bay head deltas, bay muds, and barrier bars and spits are also part of the bay-fill sequence. Many substantial fields have been found in these incised channel deposits and despite the ease of seismic identification, more incised channel reservoirs remain to be discovered.

Deep Water Fans - Deep-water sandstones are deposited during times of lowstand of sea level. They occur in blanket-like geometries ("basin-floor fan") and in channeled and lobate geometries ("slope fans"). Usually they are coeval with maximum incision of the shelf, and slightly predate the prograding complex. In the Yegua, major foundering of the shelf margin due to slumping and/or scouring appears to coincide with some lowstands; slope fans are major components of the fill of these eroded areas

RESERVOIR CHARACTERISTICS
Most of the production in the Expanded Yegua Trend has been from shallow marine deltaic and bar sandstones, although significant production has also been found in deep-water channeled fans. All of the significant production has been found within the expansion fault tend at the Yegua shelf margin, even though deep-water sandstones have been found up to 30 miles downdip in Brazoria County and Calcasieu Parish.

A series of highly productive normally pressured to overpressured gas reservoirs have been discovered in the "mid-dip" Yegua. These reservoirs occur in fluvial and estuarine sandstones within the incised valleys that funneled sand downdip. They are located either miles back on the shelf or just updip of the expanded trend. The fields have added some 200 to 300 BCF to Yegua gas reserves, mostly in the Wharton-Jackson fairway. Productive sandstones in the established trends range from 40 to 800 ft in thickness. They are mostly of very high quality, even when (as is often the case) they are highly laminated. Permeabilities of 100 to 1000 millidarcies and porosities of 24 to 32% are common. Recovery factors calculated in the Wharton-Jackson fairway range from 1100 MCF/ac-ft to over 2100 MCF/ac-ft. The produced gas is condensate-rich; a ratio of 30 BC/MMCF is the average for areas east of Jackson County. As of March 2003 Goliad County natural gas was selling at just over $10 per MCF.

YEGUA TREND, GOLIAD COUNTY, TEXAS

The Yegua trend in Goliad County occurs as sand bars paralleling the present Gulf of Mexico coastline. The trend is interrupted by down to coast faulting. Several fairly prolific fields have been discovered and exploited in the county, the two most recent being the Jobar field and the Perdido Creek field. The Jobar field is located in a normal pressured Yegua sequence, with bottom hole pressures at 5400' being 2600psi. Recoverable reserves in this field are 850 to 900 mcf/ac.ft with a condensate content of about 10bbl per mmcf. The most prolific well has produced 1.8 Bcf to date and had maximum production rates of 5000 Mcf/d. Average IP was 1500 Mcf/d.

The Perdido Creek field is down dip and geopressured with bottom hole pressures of 3600psi at 5600'. Recoverable reserves in this field are 1100 mcf/ac.ft with a condensate content of 30 bbl per mmcf. Initial production rates are approximately 2000mcf/d with cumulative production in one well over 1.7 Bcf. Both of these fields were discovered on seismic amplitude anomalies.

THE MANAHUILLA CREEK PROSPECT
The Manahuilla prospect is located on a downthrown fault block from the Perdido Creek field. The amplitude characteristics of this series of sands look identical to the Jobar and the Perdido Creek fields with the exception that it is much more extensive in area. The prospect covers over 1200 acres 4 miles to the south of the Perdido Creek field. The Yegua sands occur at 1650m to 1700m or approximately 6150' to 6500'. It can be expected that these sands will be geopressured with bottom hole pressures being in excess of 4000 psi. The extent of the seismic amplitude sequence is defined by seven 2 dimensional seismic lines. There has been a large amount of shallow drilling in the area but no well has penetrated more than 4100 feet. The shallow oil and gas fields over the acreage have been depleted and abandoned.

RESERVES
Using reservoir parameters obtained from production in the area it can be estimated that recoverable gas reserves will be 1200 Mcf/ac ft. with a condensate yield of 30 bbl per Mmcf.