Recommended Course of Action at Mission River Field
Summer 2007

Recent History

As a direct result of detailed and methodical examination of the available relevant, scientific and other data associated with the Mission River Oilfield, experts in partnership with McFuel, concluded that multiple un-produced oil or gas-bearing strata existed in the Field. In two of the older wells in the Field, the Hawn Brothers NO.1 Mitchell and Beckham Mitchell No. B-2 (later re-numbered C-1) wells, Schlumberger performed cased-hole formation tests through production pipe into potentially productive zones of interest.

Results of such tests indicated that seven (7) zones in both well bores contained oil or gas; additionally, it was concluded that such oil or gas zones were undepleted since they possessed "original" formation pressures. It is surmised that such strata have been either unrecognized or intentionally bypassed because of economic, technical, or marketing issues, i.e. poor pricing for natural gas; the usage of imprecise well survey tools; or the absence of a natural gas market delivery infrastructure, etc.

McFuel agreed with such conclusion; acquired the subject leases from former owners, and began an effort to substantiate (or invalidate) this theory by drilling new wells and applying updated technologies to the Field. In July, 2004, the first new wellbore was commenced, followed by eight (8) other wells drilled and completed successfully over the next three (3) years from various previously untapped horizons. Six (6) wells above 6,400 feet and three (3) wells from Middle Vicksburg Period (Oligocene Age) sands were found productive at 8,330 - 8,340 feet (No.6), 8,414 - 8,430 feet (No.7) and 8,404 - 8,407 feet (No.1 Scanio-Hawn Unit). 1,142,856,000 cubic feet of gas and 42,746 barrels of oil and condensate have been produced therefrom through May 9,2007.

Current Status

During September through December 2006, McFuel commissioned Trend Geophysical Company of Midland, Texas and Denver, Colorado to undertake what is known as a "foot print" 3-D seismic survey over its subject Mission River Oilfield holdings. The impelling reason for the commissioning of the 3-D shoot was the discovery in McFuel's Scanio/Shelton Well NO.6 of a previously untapped oil and gas section located at approximately 7,800 - 7,900 feet which recorded 750 units mud log units of gas encountered while drilling through the zone on its way down to test deeper potential zones of interest (TO 10,300+ feet).

The new pay at 7,800+ feet is in a sand body surrounded by massive other sands above and below it. Further investigation by McFuel experts uncovered further basis for this new "play". It appears that Sunray Mid-Continent Oil Company in 1942 had produced gas and oil from a zone deeper in the Vicksburg sequence (+8,400') estimated to have amassed 1 BCF and an undisclosed amount of condensate. Downhole surveys taken from this wellbore (Mitchell No.6) revealed possible productive horizons found at depths between 7,400 - 8,380 feet.

In 1962 and 1964 Ginther-Warren Company of Houston drilled four (4) wells to depths below 8,000 feet. One of these (Mitchell No.4) recovered gas from the 7,800-foot target pay on a formation drillstem test. Another of these well bores (Mitchell No.2) recovered condensate in two sidewall cores. During July, 2006, McFuel drilled its Scanio/Shelton NO.7 well which extensively sidewall cored the 7,800-foot column. The sidewall core analysis revealed the presence of oil and gas condensate from 7,793 -7,865 feet. The formation tester tool recovered 17.9 cubic feet of gas, a trace of oil, plus 500 ccs. of filtrate. Final shut-in bottom hole pressure at 7,816' was normal pressured.

Rationald For Phase II Development Of 7,800-Foot Interval

The 7,800 - 7,900-foot interval, as imaged by McFuel's new 3-D seismic and confirmed by subsurface information taken from wellbore penetrations, recent and ancient, confirms that the trapping mechanism is a broadfold structure against a depositional fault, detected at the top of the Vicksburg section, having at least 200 feet of throw, trending north-south.

At each of four (4) proposed drillsite locations a minimum of 10 - 20 feet of good quality net pay should be present and productive of natural gas and condensate, alone from the 7,800-foot section.

Additional proved undeveloped ("PUD") reserves, should be present at each location, all of which would be recompleted into eventually, i.e., at least two sands from the "G-Series", plus "F-31", "FQ-40", FT-8" and Discorbis 1 and 3 sands.

Risk Analysis

The information derived from abundant subsurface correlation, historical and recent production records, and confirmed by new 3-D seismic investigation provide exceptional data from which a risk profile of almost zero can be deduced.