Provident City

Pipeline Resources had a leasehold interest in the Provident City prospect, which consisted of a 315 acre lease located in southwestern Colorado County, Texas about 5 miles northeast of the town site of Provident City. The prospect acreage was acquired for the purpose of evaluating a significant seismic anomaly present on a 3-D seismic survey. The seismic data indicated the possibility of Yegua gas production; as a good 3-D seismic anomaly appeared to be present.

A review of the production history of the area indicated the presence of good quality Yegua production in the vicinity of the prospect acreage. There are numerous small but prolific Yegua fields that are characterized by dip oriented Yegua channel sand deposition that is either structurally or stratigraphically trapped. The reservoirs consist of good quality, permeable sands with most exhibiting a depletion drive mechanism. After correlating subsurface geology and our 3-D seismic info rmation, it was determined an initial test well had to be drilled.

An initial test well was drilled in January 2005 to a depth of 6800' to test the seismic anomalies present on our location. Testing of the well indicated there was a hard streak, or section of sand that was tightly compacted, which yielded no porosity or permeability. This type of streak can cause seismic signatures, which results in an apparent anomaly on 3-D seismic data. After much investigation, this is the only answer that could be determined that would cause this response on the 3-D seismic.

The well was plugged and abandoned. Pipeline Resources is now evaluating the merit of future development on this lease.