February 9, 2017

Early Results from Recent Field Activities:

We are already seeing some positive results from the initial work done on the Prue Ranch San Miguel Project. The Frac stimulation on the Hitzfelder #3 well is currently flowing back the water that was used in the treatment. The exciting news is that the well is also producing One Hundred and Seven Thousand Cubic Feet (107 MCF) of gas per day into the sales pipeline, with 100 pounds per square inch (psi) flowing tubing pressure. When the well was shut-in overnight for testing, the shut-in pressure reached 1,250 psi of pressure, which is very indicative of a very high energy formation. Once the larger portion of the water used in the treatment is recovered, we should see an increase in both oil and gas from the formation.

We have placed the Hitzfelder #5 well into production in its original reservoir, and it is currently adding between 4 to 5 barrels of oil per day to the San Miguel project. At some point in time, we will rework the #5 well and produce it from the San Miguel formation.

We are evaluating the frac procedure to determine if there are some modifications that will increase the success in future frac treatments. The frac treatment has been designed with all natural products and is energized by nitrogen, water and sand to open more pathways for the oil and gas to flow from the San Miguel reservoir.