Drilling Procedures

1. Lease Acquisition:
   a.  Standup Title Opinion.
   b.  Title Opinion.
2. Geological Interpretation:
   a.  Evaluation of Area.
      1) Look for faulting between producing horizons.
      2) Evaluation of producing horizons.
   b.  Staking new locations.
3. Engineering:
   a.  Evaluate logs on offset production.
   b.  Reserve Calculations.
   c.  Recovery Procedures of Oil and Gas- Free Flowing gas, very little water.
   d.  Drilling and Completion Procedures.
4. Drilling Procedure:
   a.  Survey Location.
   b.  Stake Well Site.
   c.  Build Location.
   d.  Drill Rat hole & Mouse hole.
   e.  Set Conductor Pipe.
   f.  Drilling Rig Up.
   g.  Drill to surface casing point ( to protect potable ground water).
   h.  Set Surface Casing (Depth of surface pipe set depends on area and depth of well).
   i.  Cement Surface Pipe.
   j.  Drill Out to Total Depth.
   k.  Samples of Well Bore cuttings evaluated for Hydrocarbon and Porosity.
   l.  Drill Stem Testing.
   m.  Run Open Hole electric logs.
   n.  Log interpretation by Engineer to see if well contains commercial quantities of hydro-carbon (oil and gas) to complete well.
5. Completion:
   
   

Oil Wells a.  Set Production Casing. b.  Cement Production Casing. c.  Run Cement Bond Log (Cased Hole logs) to Evaluate Cement Bond to Casing. d.  Set Wellhead. e.  Run String of Production Tubing, f.  Perforate Potential Pay Zone g.  Swab Well or Flow Well to ascertain fluid and gas volumes of well;  both Shut-in and Working Pressures. h.   Frac Well if Fluid Volume and Gas Volume should be increased without damage to the Pay Zone. i.  Set Christmas Tree for Flowing Oil Well. j.  Run Sucker Rods and set Pump Jack for Pumping Well. k.  Set Production Equipment, Tank Battery and Dehydrator. l.  Evaluate well for Stabilized Production. m.  Well completed and On Line.

Gas Wells a.  Set Production Casing. b.  Cement Production Casing. c.  Run Cement Bond Log (Cased Hole logs) to Evaluate Cement Bond to Casing. d.  Set Wellhead. e.  Run String of Production Tubing. f.  Perforate Potential Pay Zone. g.  Swab Well or Flow Well to ascertain fluid and gas volumes of well; both Shut-in and Working Pressures. h.  Frac Well if fluid volume and gas volume should be increased without damage to the Pay Zone. i.  Set Christmas Tree for Flowing Gas Well. j.  Run Sucker Rods and set Pump Jack for Pumping Well. k.  Set Production Equipment, Tank Battery, Dehydrator and Build Pipeline to Main Gas Purchasers Line. l.  Evaluate Well for Stabilized Production. m.  Well completed and On Line.

6. Pre-Production - Stimulation:
   Most wells require an initial stimulation or treatment to "jump start" a well to begin flowing. The turn-key agreement allows for the first stimulation. Additional stimulations, treatments or fractures may be deemed necessary and are typically paid for by the working interest holders.
   
   This is when the expertise and experience of the logging service company (i.e. Schlumberger), the geologist (i.e. Geo-Logic) and the operator (Salado Oil) are fully leveraged.  Intense scrutiny and experienced analysis are necessary to formulate the best course of action to maximize production of the wells while maintaining stabilized production.
   
   Stimulation methods can range from simple acid treatments to complex design fractures by the above mentioned geologist and engineers. However, as all companies involved have working interest, cost versus potential return is always paramount.
7. Begin Selling Oil and Gas:
   a.    Legal Filing.
        1)    Division orders filed with respective County Clerk.
        2)    Revenue Disbursement.
   b.    Oil and Gas Production Purchasers cut check to Well Operator.
   c.    Well Operator cuts check to respective Prospect Bank Account.
   d.    Bank disburses revenue checks to Joint Venture Partners.