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Lokern California, United States

Overview

Lokern horses

The Company currently owns a 100% working interest in this prospect. The Lokern Prospect is located in the southern San Joaquin Basin in Kern County, California.

The prospect lies on a large seismically-controlled structure which is possibly the last remaining undeveloped large structure in the southern San Joaquin Basin. Some of the largest oil and gas reserves in the U.S. are located in this part of the San Joaquin Basin with greater than 10 billion barrels of oil and 10 trillion cubic feet of gas.

It is postulated that an accumulation occurs where the Upper Stevens turbidite channel sand lies draped across the well defined Lokern structure, forming a structural-stratigraphic trap. The Lokern prospect will be drilled as an offset to the Machii-Ross Ackerman well which had approximately 240 feet of net pay from log analysis. There may be an additional 150 feet of potential pay in the Upper Stevens turbidite channel in the Ackerman well; however, due to hole washout an accurate log analysis could not be done. The Lokern prospect is located immediately north of Elk Hills and Tule Elk fields, which have combined reserves greater than 1.5 billion barrels. There is a ready market for the oil with a number of pipelines in the proximity of the prospect.

Geology

The primary objectives are the Miocene Stevens formation and the deeper Carneros member of the Temblor formation. The secondary objectives include the Plio-Miocene Reef and Pliocene Etchegoin sands.

The late Miocene was a particularly important time for the southwestern part of the basin, as the west source of Stevens, the Temblor Range was formed. Basinal structures associated with these tectonics also began to grow. Anticlines with some relief remained bald of sands until overtaken and covered with turbidites. Channel deposits coursing around these anticlines were uplifted as the structures continued growing making excellent down-flank stratigraphic traps.

On July 22, 2009, Occidental Petroleum Corp. (OXY) announced it had made what could be the largest oil and natural gas discovery in California in 35 years. The company, one of the largest U.S. independent oil and gas producers, said early indications suggest there are between 150 million and 250 million gross barrels of oil equivalent reserves in the defined area. The discovery was made in Kern County, about 130 miles north of Los Angeles. The bulk of the discovery's producing zones are conventional oil- and gas-bearing formations. Approximately two-thirds of the discovery is believed to be natural gas.

It is believed that Oxy's discovery came in the Carneros Sandstone Member of the Temblor Formation. It is thought that the Carneros and older sands, found at shallower levels, can be highly productive in fields around Elk Hills.

The lack of deep penetrations at Elk Hills and the stratigraphic nature of the play would explain why it is just now coming to light.

Prior to this year, the last oilfield with over 100 million barrels discovered in Kern County was the giant Yowlumne Field, near the south end of the San Joaquin Valley, discovered by Texaco in 1974 on a farm-out from Tenneco.

It is speculated that the producing reservoir could have resulted from the west side of the San Andreas fault sourced sand-rich deepwater marine gravity-flow deposits that followed tectonically changing bathymetric lows, forming great accommodation spaces for sediments.

The turbidite thicks are narrow, a half-mile to a mile-and-a-half across, but there may be one thousand feet of sands.

The reservoirs are similar to turbidite channels, although not a typical meandering channel sands, with the potential of being highly localized and later structurally uplifted but down plunge on the anticlinal nose or trapped under a thrust fault.

The Oxy discovery is probably an older, lower sand. To date, the earliest productive sand identified at Elk Hills is the Lower Miocene Carneros Sandstone, part of the Temblor Formation beneath the Monterey.

Kern County encompasses a significant oil-producing area of the United States, with a number of giant fields. Elk Hills, about 20 miles west of Bakersfield, is the fifth-largest oil field in California and the state's most productive gas field.

Early oil migration is an important factor in producing favorable reservoir conditions and preventing a collapse into low porosity and tight formations.

The deep arkosic sandstones of the Miocene in the center part of the basin have been deposited so fast that they're overpressured, which tends to protect the permeability and porosity.

The favorable conditions and pore preservation are important when drilling below 10,000 feet in Kern County.

The reservoir sands are probably naturally fractured Carneros Sands sourced from the Eocene Kreyenhagen Shale.

Carneros Sands might have porosities in the range of 10-to-14 percent, if the productive depths are from 10,000 to 12,000 feet and good gas producing rates can come from much lower permeable sands, but natural fractures, if they exist, would be of great benefit, as well as sand frac stimulations, to increase production rates.