The Company has acquired significant land positions in two project areas and plans to initiate drilling operations in 2010. Follow-on and development drilling programs are set to begin after thoroughly testing the primary target zones in each wellbore on its prospective properties. Wells will be tied in and put on production as soon as market access can be acquired and flowlines lay to tie in points. 

OIL PROSPECT – NEW MEXICO

Management has selected this project based on its potential for immediate production of oil from relatively shallow wells. Two giant oil fields lie within the target trend and have produced over 2.2 billion barrels of oil.

San Andres Carbonates
Northwest Shelf of the Permian Basin
Northeast New Mexico

The San Andres, a carbonate sequence of Permian Age, is one of the most prolific oil producing horizons of North America. Deposited as an overall regressive sequence, underlain by high-energy transgressive sands and overlain by evaporates. The San Andres oil traps are formed where porous dolomites, capped by evaporates, grade up dip and laterally into nonporous limestones. The depositional model appears to occur where subtle topography led to the development of intertidal carbonate mudflats. Laterally the mudflats were dissected by tidal channels, where later lithification of the channel deposits resulted in formation of limestones and diagenesis led to dolomitization and reservoir development of the carbonate mudflats.

There are three major porosity cycles developed within the San Andres. Each cycle represents a separate transgressive event and each event is characterized by a lower shale sequence overlain by carbonates and grading into evaporites.

The youngest porosity cycle is developed along an 80-mile stretch in an east to west direction, from the Texas - New Mexico border to the Pecos River of New Mexico. Over 2.2 billion barrels of oil have been produced from this cycle from depths less than 5,500’. Two giant oil fields lie within this trend; the Wasson and the Slaughter-Levelland.

The oldest porosity cycle is represented in the east to west trending asphalt pit near the town of Santa Rosa, New Mexico. Estimated to have contained 90 million barrels of oil in place (New Mexico Bureau of Mines), this trap was breached during the Tertiary Period and now is exposed at the surface.

Morgan Creek’s Frio Draw Prospect focuses on the middle porosity cycle. Detailed log analyses on over 100 wells penetrating this cycle have delineated areas where there is a noted increase in porosity and permeability. Within this trend, the majority of analyzed wells demonstrated oil and gas shows. No commercial production has ever been attempted. Morgan Creek’s depositional - diagenetic modeling, based on Shell Oil’s stratigraphic testing of this porosity cycle in the mid 1960s, has defined several prospective productive areas.

Morgan Creek’s leased block currently sits at approximately 13,250 acres. Drilling to the target depth poses no serious operational. Overall drilling, completion and equipping base costs, projected at $675,000 per well. The initial target location has been selected.

ECONOMICS