Refugio Heard and Ryals

Refugio County, Texas

Pipeline Resources, Inc. acquired 1225 acres of leases in the Refugio Heard Field, Refugio County, Texas, a part of the Frio Trend unequaled in oil and gas production. Structurally, it is part of the Sam Fordyce-Vanderbilt Fault zone which created abundant structural traps, from large anticlines to subtle fault closures. Depositionally, this portion of the Frio is characterized by highly porous and permeable sands that serve as excellent reservoirs. These structural and depositional elements made this portion of the Frio a premier producing area for over 60 years. It remains one of the most attractive areas for additional development along the Texas Gulf Coast.

Previous exploration in the Refugio Heard Field delineated a geologic setting ideal for additional infield drilling. The field produced over 9.31 million barrels of oil (MMBO) and 46 billion cubic feet (Bcf) of gas from 29+ reservoirs in the Frio and lower Miocene sections. Most of this production came from several extremely stratigraphically complex intervals. Detailed mapping and production records indicate substantial infield reserve potential.

Assuming previous exploration produced approximately 80% of the recoverable reserves, additional reserves of about 2.32 MMBO and 11.5 Bcf of gas can be expected. These reservoirs are typically highly permeable, with flow rates of 500-1000 thousand cubic feet (Mcf) per day for gas and 75-100 BO common. Data indicates ten or more additional wells may be necessary to develop reserve potential.

An aggressive drilling program is planned to develop the Refugio Heard Field’s remaining reserve potential. An initial test well was successfully drilled in the fourth quarter, 2006, with follow-on wells planned every 60-120 days until project completion. A fourth Heard well drilled successfully in September 2008 and went into production in November at 500 Mcf/day. The #1 well is currently shut in, awaiting recompletion. The #4 well will also be recompleted in the near future. Total monthly Refugio Heard production exceeds 11 million cubic feet (MMcf) of gas.

The Refugio was augmented by the adjacent 40.77 acre Ryals lease in June, 2008. The Ryals #1 was successfully drilled in the first quarter 2010, with eleven potentially productive oil and gas zones discovered. The well is awaiting completion.