HOW TO MAKE AN OIL AND GAS WELL

We hope that the information presented here will be helpful to you. For those unfamiliar with oil and gas development, an effort has been made to explain what is actually needed to create a productive oil and gas well. Those already investing in oil and gas will, no doubt, be familiar with much of the material presented. We hope that you will enjoy the more technical end of the fascinating business of bringing oil and gas from deep in the earth to fuel the energy needs of America.

THE ANATOMY OF AN OIL WELL

The following is a brief description of each of the major steps taken by Oil Company in orderly progression beginning with the raw land, through obtaining the profits from the oil and gas produced, and reclaiming the land.

SITE PREPARATION

The location for an oil well requires a level area about 150 feet by 200 feet with an adequate all weather access road. The drilling rig must be moved in and out along with numerous equipment trucks and crews. Additionally, it must be accessible to oil tanker trucks that will pick up and haul the oil produced to the refinery.

Progressive Energy Partners makes every effort to build good sites at minimum cost. Costs can vary greatly according to location and terrain. A natural level spot beside an existing highway can obviously be developed at less expense than cutting the same area out of the side of a mountain and building miles of road to the location. Sites are chosen within a given lease to maintain adequate spacing between each well.

DRILLING

Once the site is prepared, the drilling rig is moved in and drilling commences. Drilling rigs come in two basic varieties: Rotary and Spudder. The spudder, sometimes called cable rigs or wire rigs, are the older and slower machines. It drills the hole in the ground by hoisting a heavy bit on a wire cable and letting it fall back down, pulverizing the rock beneath it. The crushed material, after a number of strokes, is bailed from the hole as a mud and water mixture. The bit is then lowered back into the hole to pound some more. It takes about six weeks to drill a well with a spudder. Because of the time involved, drilling with a spudder costs a bit more.

The rotary rig is a modern giant, capable of drilling over 1000 feet per day with a rotating bit driven by huge engines. Fluid or air is forced under pressure down the center of the drill stem thereby flushing out the hole continuously as the drilling proceeds. The rig is operated around the clock, adding drill stem as the hole deepens. This machine can drill a 4000 foot well in only a few days.

SURFACE CASING AND CEMENTING

The surface casing is an 8 5/8” steel pipe that extends from the top of the hole down to about 1200 feet. Drilling is stopped at this point and cement is forced down through the casing and back up around the outside, thereby bonding the surface casing to the hole.

DRILLING CONTINUES

After the surface casing cement has set, drilling continues with a smaller bit until the final depth reached.

OPEN HOLE LOGGING

At this stage several types of logs may be prepared for the well to compare drilling samples and pinpoint productive zones in the well.

PRODUCTION CASING AND CEMENTING

After open hole logging is completed, production casing, which is a 4 ½” steel pipe, is assembled and lowered into the bottom depth of the well. Again cement is forced down through the production casing and back up around the outside, thereby sealing the pipe to the hole.

CLOSED HOLE LOGGING

Once the production cementing is in place, additional logs, such as the cement bond log, are used to develop even more information to pinpoint productive zones in the well.

PERFORATION

With the samples available from the drilling and the completed logs of the well, decisions may now be made as to which zones of the well should be produced and in which order. The productive strata desired are pinpointed in the well as a definite depth down hole from the top of the casing. An explosive charge, surrounded by steel ball bearings ½” in diameter, is lowered down hole to the exact level desired and, upon detonation of the explosive, the steel balls are driven through the production casing thereby perforating the well into the productive zone selected. In the field you will hear the term shortened to “perf” or “perfing the well”.

ACID

Following perforation an acid solution is placed in the well to a level above the perforations for the purpose of eating away the cement between the production casing and the outside of the hole at the level of the perforations.

FRACTURE

After sufficient time for the acid to work the well will be fractured. In the case of the Brown Shale, pure nitrogen is used for fracturing. Again, you will hear the term shortened to “frac” or “frac job” or “fracing the well”. The Brown Shale contains many natural fractures and it is the purpose of the “frac” to further open and connect these natural fractures for a large area around the well. Nitrogen is pumped down the well with huge pumps at pressures up to 3000 pounds per square inch. Breakdown occurs and nitrogen continues to be pumped down the well, through the perforations and into the fractured formation, at high volume for maximum opening and connecting of the natural fractures.

The well is then shut in and held at pressure for a brief period. The well is reopened and the nitrogen is allowed to blow down from extreme pressure to lower pressure, where the natural gas and oil in the formation begin to flow with the nitrogen toward the well. As the pressure drops, the nitrogen and gas mixture is vented through flare pipe and ignited until the well is producing pure gas and the nitrogen is exhausted. As soon as the flare is pure, the gas may be turned in through the meter to the waiting gas transmission line, and the well is making money within hours of the fracture.

The well may also be producing oil at this time depending upon the pressure. The oil will not move through the formation when the pressure is high, so we must let the pressure come down naturally to a level at which the oil will flow. Reducing the pressure drastically and quickly can lead to huge initial flows of oil that are most impressive, but also run the risk of collapsing the natural fractures after the big oil surge is over. Considerable money has just been spent to enlarge the fractures so we don’t risk collapsing them just to get impressive oil production up front.

Depending on the pressures the well may “come on oil” the day of the fracture, or it may be days or even weeks later before pressure drops sufficiently to flow the oil without risking damage to the system. If the producible reserves of the shale in this well are 15,000 barrels of oil, it makes more sense to Progressive Energy Partners, to get them all over a longer period of time, than to get only a small portion of them quickly and ruin the zone.

PRODUCTION OF THE WELL

Many wells in the Brown Shale can be produced for lengthy periods of time by flowing them. So long as there is sufficient gas pressure and volume, it may be used to lift the oil to the surface of the ground without pumping. At some point in time each well will have to be pumped for oil production. This project includes all equipment with pumping jacks at today’s prices. The investor does not pay more for equipment by delaying purchases until a later time of higher prices.

Each well is checked at least daily by our production crews and as many more times as are required to insure maximum production of both oil and gas. Gas is distributed through in-place lines at no transmission cost to investors. Gas checks are disbursed monthly. All oil is picked up from well site tank batteries by tanker trucks and oil checks are disbursed monthly.

REASONS TO INVEST IN OIL AND GAS

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POTENTIAL HIGH FINANCIAL REWARDS

RISK

TAX BENEFITS

DRILLING PROSPECT AVAILABILITY

COMPETITION

DEMAND/CONSUMPTION

GOVERNMENT

WINDOW OF OPPORTUNITY

OIL AND GAS PRODUCING HORIZONS

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PENNSYLVANIAN ERA:

1ST COW RUN SAND: Middle Conemaugh Group – Mahoning Sandstone (In this portion of Pleasants County it may be equivalent to the Saltzburg Sand) – Coarse grained sand, between 20 and 30 feet of gross sand – Light gray to white to opaque in color – Grains are sub-angular to round – Cementing material is a carbonate ranging from 5 to 28% area, where the grains are smaller, have the lowest cementation - Formation is about 80% quartz – In the area around the Burning Springs Anticline, this sand is found at about 350 feet below the surface or 300 feet below the Pittsburgh Coal.

2ND COW RUN (LITTLE DUNKARD SAND): Lower Conemaugh Group – Upper Freeport Sandstone – Coarse grained sand, between 50 and 70 feet of gross sand interval – Gray to white to opaque in color – Grains are sub-angular to round – Formation is from 70% to 95% quartz – In the area around the Burning Springs Anticline, this sand is within 750 feet of the surface.

BIG DUNKARD SAND: Base Conemaugh – proper name Dunkard Sandstone – Fine Sands grading to coarse grained sand or pebbly, between 50 and 65 feet of gross sand interval, with a shale break – Gray to white to opaque in color – Grains are sub-angular to sub-round – Formation is from 70% to 90% quartz – This sand is about 100 feet below the Second Cow Run Sandstone. The formation had some oil and gas saturation.

HORSENECK SAND: Middle Allegheny Group – Most of this formation is fine grained gross sand about 50 feet thick – white to opaque in color – Grains are sub-angular - Formation is from 70% to 80% quartz – This sand is about 75 feet below the Big Dunkard Sand. The formation has gas saturations with some oil shows, which is probably not commercial.

SALT SAND SERIES: Pottsville Group – Lower Pennsylvania Series – Usually occurs as three formations, but along the Burning Springs Anticline there may only be one formation – Composed of sand-sized calcium base mineralogy, generally well-sorted and rounded – Very good porosities and some of the best permeabilities in the Appalachian Basin, can be from 50 to 100 feet thick – Usually has saturations of low pressure gas, oil and salt water, and by conventional standards, is considered uneconomic.

MISSISSIPPIAN ERA:

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MAXON SANDSTONE: Top of the Mississippian Era – Top of the Mauch Chunk Formation – Composed of medium to fine sand-sized grains, white to gray and usually well-rounded – Locally, may be absent along the axis of the Burning Springs Anticline – Very hard having accumulations of natural gas, oil and water – During stimulation, has a tendency to channel to salt water, so best results are achieved by producing this formation naturally or following acidization.

KEENER SANDY-DOLOMITE: Greenbrier Formation – Composed of 50% quartz sand with the balance of the formation matrix made up of Dolomite – Can vary from fine grained and hard to coarse grained, and has secondary cementation- Grains are generally white to gray, not always well-sorted nor rounded – Formation ranges from 30 to 50 feet thick and lays at the base of the Big Lime.

BIG INJUN SANDSTONE: Basil Greenbrier Series Formation (actually the Greenbrier Sandstone) – Found directly under the Keener Sand or below a thin shale break under the Keener Sand – Can vary from 50 to 100 feet thick – When not separated from the Keener Sand and/or the Pocono Sand, thicknesses of much greater than 150 feet are obtained – Composed of 80% or 90% poorly sorted sand-sized angular to sub-rounded grains – Balance of matrix made up of dolomitic minerals or broken shales – Has various coarse grained streaks within it yielding the highest porosities – Porosities ranges from 8% to over 17% in such streaks – Has accumulations of natural gas, oil and salt water.

POCONO SANDSTONE: Pocono Group – (Sometimes referred to as the Squaw Sand) Rarely separated from the Big Injun – In our area it is separated from the Big Injun by a shale – has considerable amount of iron substitution in the composition of the Silicon-Dioxide Molecule giving a reddish appearance – Has a higher percentage of shale fragments.

BEREA SANDSTONE: Pocono Group – Basil Mississippian Era – Varies from 2 to 20 feet thick in this area – Composed of 40% to 60% sub-round quartz sand grains with the balance being a dark shale giving the formation a salt and pepper appearance – Has saturation’s of crude oil, natural gas and water.

DEVONIAN ERA:

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GORDON SANDSTONE: Hampshire Formation – From 10 to 20 feet thick composed of not more than 60% sand-sized grains with the balance being shale material – Porosity of this sand ranges from 6% to 11% - In this area has saturation’s of natural gas, crude oil and water.

WARREN SAND-SHALE: Chemung Series – Fine sand particles 40% to 60% within the matrix – At least 50 gross feet – Has the potential to produce both natural gas and oil or condensate – Porosity and permeability directly related to the presence of naturally occurring fractures – Initial porosity on the order of 6%.

UNDIFFERENTIATED MIDDLE CHEMUNG SHALES: Chemung Series – A group of silty-stringers that may have good characteristics on the open hole logs – these may be equivalent to some sand-strings to the east such as the Bayard, Speechley, Balltown – Particularly accurate in this area where Devonian Sequence is very thin – Several zones have definite productive potential of both oil (condensate) or natural gas.

RILEY SAND-SHALE: Chemung Series – about 30 gross feet thick – a sand break within a Shale dominated interval – Sand concentrations rarely greater than 40% very fine, rounded sands. Although it probably has saturations of gas, it is probably not productive.

HAMILTON SHALE: Hamilton Series – Composed predominately of black mica shale with a balance of the matrix being decomposed organic material or Karogen – Has a distinct increase in the well’s natural show during drilling but few areas have the porosity to stimulate.