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Cameron Meadows Land Company Lease

This property was sold by RE in March 2010 at 10 times the acquisition price paid in 2002. Located on the eastern flank of the Cameron Meadows Salt Dome, this lease has been producing since the 1970’s from numerous formations with depths ranging from an oil zone at 1200’ to a gas zone around 8000’. Cumulative oil production is over 4 million barrels and gas production is over 2.5 bcf. Many of the existing wells, both shut-in and producing, have behind pipe oil and gas zones. Although 43 wells have been drilled on the lease, 16 wells remain. All of the wells are in shallow water, five to eight feet deep. The central separation facility is located on land and accessed by boat. There are many drilling opportunities on the property as evidencd by the drilling of several wells by the new owner since RE's sale to them just 10 months ago. As a result, oil production has increased from 60 bopd to 180 bopd with significant increase in natural gas production.

 

Cameron Parish School Board Lease

Located on the northern flank of the Cameron Meadows Salt, 43 wells have also been drilled on this lease. Producing formations range in depths from 1350’ to 5273’. The enlarged section of land comprising 880 acres was active from the 1930’s until 1991 when all remaining wells were plugged and abandoned and the lease returned to the landowner. Subsequently, two new wells were drilled; CPSB #2 in 1993 and CPSB #1 in 1998. Both wells were eventually shut-in by 2000 and the lease returned to the landowner. Cumulative oil production is over 6 million barrels.

In 2003, RE obtained a new lease on the property and began operations to return the two shut-in wells to production. CPSB #2 is capable of making 12-15 bopd while the CPSB #1 was initially a gas well but upon depletion was shut-in awaiting future utilization. CPSB #3 (a re-entry of the plugged Well #37) was completed in 2004 and utilized as a saltwater disposal well while CPSB #4 (a re-entry of the plugged Well #31) was recently completed flowing approximately 60 bopd before increased water production required the well to be shut-in awaiting remedial work to be performed. In the meantime, the well will flow, on average, 3 bopd water free.

With existing production of 15-20 bopd, this lease provides RE with cash flow to support the further evaluation of developmental and exploration activities. Estimated recoverable oil reserves from the currently zones are 40,000 barrels with an additional 100,000 barrels of oil reserves from a behind pipe zone in one of the existing wells.

Development of this property has been limited and only 40% of the acreage has been properly evaluated. RE purchased 5 square miles of 3-Dimensional Seismic in order to determine the property’s full potential. We have completed an initial evaluation of the lease based on the 3-D Seismic data which identified several areas of high potential at a very shallow depth, less than 3000’. This work has generated two exploration wells which could potentially discover 1,000,000 barrels of oil reserves. The best prospect of the two could recover 500,000 barrels or more and the second prospect, 150,000 barrels. Additionally, subsurface mapping of existing and plugged wells have identified unproduced oil still trapped in various structures from 3900 feet to 4200 feet. A volumetric analysis indicate potential oil reserves of 500,000 barrels. Two proved undeveloped well locations have been identified to recover these reserves.