Overview of the Pickens Field

The Board of Education #6 Well

1Pickens Oil Field, Yazoo County, MS

The Pickens Oil Field (Pickens) is located about 35 miles north of Jackson, Mississippi, in Madison and Yazoo Counties. The field was discovered by Kingwood Oil Company in March of 1940 with the drilling of the R. E. Wilburn No.1, which was completed open hole in the Eutaw Wilburn sand a depth of 4878-4889 feet, and initially tested 1013 barrels per day of 40 gravity oil and eventually produced 356,489 barrels of oil. Pickens was discovered six months after the discovery of the Tinsley Field in western Yazoo County, and was the fourth field discovered in Mississippi. Pickens has produced 20,441,487 barrels of oil from the Eutaw Wilburn sand, and 1,774,820 barrels of oil from the Selma Chalk. The field is a five-mile long northwest-southeast trending fault line trap with up-thrown fault blocks and structural closer. Pickens is located near the western end of the Pickens-Gilbertown fault system, which begins west of Pickens, and extends to the southeast through the producing oil regions of Scott, Jasper, and Clarke counties Mississippi, and ending at the Gilbertown Field in Choctaw County, Alabama. It is believed that an upward movement in the Louann Salt caused a northwest-southeast trending salt ridge, creating an overlying high relief Smackover structure and severe faulting in the shallow reservoirs of the Eutaw and Selma Chalk formations. The high-grade crude oil that has charged the shallower horizons, most likely migrated up the faults from the Smackover structure below.

The Selma Chalk Formation

1 The Texaco Oil Company discovered the Selma Chalk (Chalk) in March of 1963 with the completion of the Eliza Thomas No.1. This well is located in the SE quarter of Section 29 of T12N-R3E, Yazoo County. The Chalk is a light gray carbonate rock, which is approximately 900 feet thick in the Pickens area. The Chalk is more sandy and permeable in the northwest portion of the field and less permeable in the southeast portion of the field. Up until 1963 the oil produced at the Pickens Field came from the Eutaw. Over the years as Eutaw wells were being drilled, it became common knowledge in the local oil industry as well as drilling contractors that a loss of circulation would sometimes occur when drilling through the Chalk. Also, oil would occasionally appear on the mud pits as drilling mud was circulated back to the surface after drilling the Chalk section. The Eliza Thomas No.1 was north of the Pickens Filed on a separate fault and was completed in the Chalk from 4434 to 4454. After acidizing, the well flowed 309 BOPD and no water with 175 pounds of flowing pressure tubing pressure. The Chalk produced high gravity oil (37-40 degrees), similar to the Eutaw. John McGowan and Clement & Stover drilled other Chalk wells that were much more successful than the Thomas well. These operators would typically run a Drill Stem Test to see if the Chalk would show oil. This was a fairly successful technique, but was not always an indication of whether a well would be productive or not. McGowan and Clement & Stover, however, completed the more successful wells in the field such as the Varnado, the Livingston and the Bridgforth. Out of the 27 Chalk wells completed at Pickens, the average cumulative production was 65,734 BO. However, the better producers in the field were the H. R. Varnado No. 1, the No. 2 Board of Supervisors, the Stewart Bridgforth No. 2, and the Livingston No. 1. These four wells averaged 263,000 BO per well. Drilling in the more permeable part of the field along with cutting the fault at the optimum depth, most likely, led to the higher recovery. The No. 2 Board of Supervisors was drilled by Clement & Stover and is located in Section 16 of T12N-2E of Yazoo County. This well was completed in the Chalk open-hole and no log was run. The initial test was 64 BO and 8 BW

2 per day, and produced 340,000 BO cumulatively. This well steadily produced an average of 4472 barrels of oil per month (149 per day) for the first four years before it began to decline. The Clement-Stover/Stewart Bridgforth No. 2 flowed 168 BO and 48 BW per day on the initial test, and produced a total of 213,500 BO. The McGowan/H. R. Varnado No.1 tested 156 BO per day, and produced a total of 440,000 BO cumulatively. The Clement-Stover/#1 Livingston, located in Section 15, had a failed DST (recovered mud with no oil show) through the pay zone. But after perforating 4,584-4,634 and acidizing, it tested 112 BO and 5 BW per day, and produced 110,000 BO, cumulatively. In March of 1996, G & S Oil Company re-entered the Palmer Petroleum/Bridgforth No.1, and completed in the Selma Chalk from 4180 to 4230. The well flowed 380 BOPD with no water and 225 pounds of tubing pressure. Cumulative oil production was 49,496 barrels. A fault cut the Chalk in the top 150 feet of the section. The pay section shows no SP response and resistivity of 7 ohms. This well did not flow oil until it was acidized with Hydrochloric acid. After reviewing various Selma Chalk completions in the Pickens Field, it seems that the wells that cut a fault in the top 100 feet of the Chalk section performed better than the ones that did not. Acidizing after perforating, may also be important for a successful completion.

The Board of Education #6 Well

The Board of Education #6 well (BOE #6) was drilled in March of 2011 and is located in the SW/4 of the NW/4 of Section 16, Yazoo County, Mississippi. It was drilled 150 feet from Board of Supervisors #5 well, where a 40-foot fractured Selma Chalk zone is evident on the well log at 4,300 feet. The BOE #6 and BOS #5 wells are close to structurally flat and are both 692 feet high to the 70 foot pay section in the BOS #4. The BOE #6 well encountered a 125-foot fault at 4335, which is where the driller lost circulation. Log resistivity readings were lower in the BOE #6 due to the loss of circulation 3 in the fractured zone, which is believed to have been around 5,000 barrels of drilling fluid. The loss circulation material in the drilling fluids contained a very high concentration of Chlorite, along with Bentonite and Mica. With all of these materials being high conductors of an electrical current, it is believed that this is the cause for lower resistivity readings on the BOE #6 log in comparison, to the BOS #5 log. The BOE #6 well shows a 34 foot zone (4316-50) where the resistivity logs are separating, indicating permeability from the fractured zone. This well cut the fault 80 feet from the top of the Selma Chalk which is ideal. The BOE #6 was perforated 4320-50, and then pumped for a 10 day period. The pumping test resulted in a trace of oil, gas, and approximately 100 BW per day. This was not unexpected due to the 5000 barrels of water that was lost during the drilling. The well will need to be pumped for 30 to 60 days to remove the drilling water that was lost. At this point, it is anticipated that the well will produce 100% oil similar to other Chalk wells in the field. For the purposes of this study, it is estimated that the BOE #6 will recover as much oil as the No. 2 Board of Supervisors (located to the East), which was over 300,000 BO.

Summary of the Board of Education #6 Well

· Potential production of 100 BOPD with estimated oil reserves of 300,000 BO, and possible payout of investment of 8 months @$40 Oil. Potential value of reserves to 25% at $40 Oil = $2,100,000. Potential ROI = 14-1.

· NRI to WI = 75%. Cost of 25%: $150,000. Cost of 10%: $60,000

• Proposed arrangement with operator: After investment from Partners, Kingwood Energy, LLC (Kingwood) will commence pumping the BOE#6 Well. It is estimated that 2 months of pumping will be necessary to withdraw the drilling water that was lost during drilling operations. The Partners will be carried through 2 months of Leases Operating Expenses (LOE), which will

4 include costs for a pumper, operators overhead, butane, Frac Tank, and hauling of water. After this point, Partners will pay their proportionate share of LOE. Partners will also be carried through the costs of the installation of permanent tanks and a separator. Should the BOS #4 Well be re-entered for production at a later date, both Kingwood and Partners will have the right to participate at cost defined by a mutually agreeable AFE. The Dome-School Well located in the NW/4 of Section will be used for salt water disposal at a later date. This particular well has 9-5/8” casing to 5,447 feet.

Contact:

Henry W. H. Greaves /Kingwood Energy, LLC 1675 Lakeland Drive, Ste 304, Jackson, Mississippi 39216 Phone: 601-842-7999 / [email protected]