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In January 2008, the Company acquired a 100% working interest in oil and gas leases on the Northwest Lost Hills field (NWLH), located in Kern County, California. As the first field in which the Company has assumed full operator control, NWLH represents a significant milestone of long-term strategic importance. Since the acquisition, the Company has completed operations transitions and initial field upgrades. In August 2008, the Company completed workovers of four of 16 existing wells, and in September and October 2008 recompleted four additional wells. Both of these activities led to improvements that have resulted in increased production by an approximate 5-10 barrels of oil equivalent per day (BOEPD). Overall, the Company has increased field production and stabilized average field production at 20-25 BOEPD, compared to a pre-acquisition annual average of 15 BOEPD.
Virtually all of the current production comes from the Antelope Shale formation in the Monterey zone at a depth of approximately 4,500 feet. Based on the our consulting geoscientist’s interpretation of the Company’s 3D seismic data, the Company believes this zone has the potential to realize an additional 2 million BOE of reserves.
In September 2008, the Company recompleted three of its existing wells into the shallower Etchegoin zone at approximately 2,100 feet. 3D seismic indicates this zone could be either gas or oil, with at least 1 million BOE of reserves.
The Company is currently planning an extensive drilling program to exploit both of these zones.
The Company holds a 5.4% leasehold interest in oil and gas leases on the Lynch Canyon Field (“Lynch Canyon”) in Monterey County, California. Lynch Canyon has 320 proved acres in the Lanigan Sands, with a 30-foot pay. The field was discovered in 1963 and abandoned in 1968 after 10 productive wells produced a total of 125,000 barrels of oil. Three new horizontal wells were drilled and completed in 2006. Two additional horizontal wells were drilled in September 2007, and one additional horizontal well was drilled in December 2008. The current development plan is for a total of 14 horizontal wells on a cyclic steaming system. 2008 represents the first full year for the Company as a working interest owner. The field has averaged approximately 390 barrels of oil per day (BOPD) since the completion of the fourth and fifth horizontal wells in November 2007. The Company’s petroleum engineers project that the field has a potential for gross reserves of 10-11 million BOE.