FUTURE HORIZONTAL REDRILLING

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SHORT RADIUS HORIZONTAL DRILLING TECHNOLOGY

A large number of older horizontally drilled wells were drilled with only one lateral in the approximately 750' thick Austin Chalk interval. Long involvement with horizontal drilling has given our team the opportunity to observe that although significant amounts of known hydrocarbons are being recovered by re-entry re-completion programs presently being conducted in the Austin Chalk, substantial amounts of oil and gas remain unrecovered in many wells previously drilled utilizing medium radius horizontal drilling technology. Additional oil and gas reserves will be recovered by drilling new laterals using either medium radius or recently developed short radius technology in horizontal wells previously drilled with only one lateral.

Through an extensive research program, HOC has selected areas within the highly profitable Giddings Field to take advantage of the short radius horizontal capabilities to access undeveloped reservoirs that are located by extensive seismic and well control. In Buda wells, undeveloped reserves should exceed 60,000 BOE per well. Undeveloped oil and gas reserves should range between 75,000 to 300,000 Barrel Oil Equivalent for wells in the Upper Austin Chalk.

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FUTURE SHORT RADIUS HORIZONTAL DRILLING

In summary, it some areas, the upper Austin Chalk is very productive. In fact, the best vertical well in the Giddings Field (Hilliard #1) encountered only the top sixty feet of the 800 foot Austin Chalk interval. Hilliard #1 has produced 887,047 barrels of oil and 4,737,659 MCF gas, totaling 1,455,794 barrel oil equivalent.

It is possible for a fault to be less than 1000 feet away from a highly productive (but now partially depleted) fault but still have close to original pressures. A considerable part of the future program will be to develop these upper Austin Chalk faults.

The development of short radius tools is a significant breakthrough. It is important to know that a thick unstable shale overlies the upper Austin Chalk. Since the upper Austin Chalk is only 250 feet below the shale, it is not technically feasible to drill horizontally with medium radius tools. Medium radius tools require more than 250 feet vertical distance to turn the curve. It is possible to drilled a new well and set 7 inch casing with about a 40 to 50 degree angle and then finish the well with medium radius tools but this will cost about $400,000 extra. Short radius tools can kick off below this shale from existing vertical well bores and it is expected that most short radius reentry wells will be drilled for about $400,000 or less.

Holifield is noted for its expertise to locate faults. This has always been the advantage Holifield has possessed. Holifield will concentrate upon drilling multiple short radius laterals to encounter high pressure faults. The Austin Chalk has many shale intervals serving as barriers to vertical migration of oil. It is possible for the lower part of the lower Austin Chalk to be depleted but the upper Austin Chalk to have original pressures.

It is in the business plan for Holifield to purchase small oil companies to gain access to un-drilled faults in existing wells. Information has been worked up for which wells are potentially productive.

Holifield has purchased a small interest in hundreds of wells in the Giddings Field during the past twenty years. As a working interest owner in such wells, Holifield has the right to propose horizontal drilling in such marginal wells. Most wells like this almost always have a large number of working interest owners willing to sell out for a reasonable price. Some of these wells can be obtained by normal oil field farm-out agreements.

CURRENT PROJECT INFORMATION

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