Kansas Oil and Gas Exploration 10 Year History & Future Strategies Kansas Oil and Gas Production # of Wells drilled by Year 100,000,000 10,000,000 1,000, ,000 MCF/Mnth BBLS/Mnth YEAR Entire State Hugoton Embayment Infill ‘97 ‘

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity 1987 to 1996 Well Completions by County (All Wells) Hugoton Embayment WC & SC Kansas Eastern Kansas

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity EUR NEB (Millions) by County 1987 to 1996 Well Completions NEB Conversion: 6 mcf = 1 bbl 122 MM bbls oil 2.2 tcf gas 1,381 bcf - Hugoton Infill 856 bcf - all others Hugoton Embayment 83.0% of NEB 89% Gas 50% Oil WC & SC Kansas 9.7% of NEB Eastern Kansas 3.1% of NEB

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity

EUR Gas (BCF) by County 1987 to 1996 HPBG Infill Well Completions EUR = Current Cumulative + (Current Monthly * 60) Total EUR: 1,381 bcf

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity Average Welltest Shut-in Pressure Hugoton Field Infill Wells EUR: 1,381 bcf Original Wells Cum. Production 21.7 tcf

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity

1987 to 1996 Well Completions by County (No HPBG Infill Wells) Hugoton Embayment WC & SC Kansas Eastern Kansas

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity EUR NEB (Millions) by County 1987 to 1996 O&G Well Completions (No HPBG Infill) EUR = Current Cumulative + (Current Monthly*48) / NEB Conversion: 6 mcf = 1 bbl Hugoton Embayment mmNEB WC & SC Kansas 47.7 mmNEB Eastern Kansas 15.2 mmNEB

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity EUR Oil (Million BBLs) by County 1987 to 1996 Oil Well Completions (No HPBG Infill ) EUR = Current Cumulative + (Current Monthly*48) Hugoton Embayment 53.6 mmBBL WC & SC Kansas 34.7 mmBBL Eastern Kansas 7.8 mmBBL

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Exploration Activity EUR Gas (BCF) by County 1987 to 1996 Gas Well Completions (No HPBG Infill ) EUR = Current Cumulative + (Current Monthly*48) Hugoton Embayment BCF WC & SC Kansas 88.8 BCF Eastern Kansas 43.0 BCF

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies Two Major Factors Effecting Future Exploration Inter-dependence of Three Principal Variables Product Price Drilling Activity New Reserves Discovered Historical Trends of Kansas Oil & Gas Reserves … The Past is the Key to the Future... Largest & Average, Oil & Gas Discoveries Best & Average New Discovery Proven Reserves Oil & Gas Reserve Replacement Rate # of new producing leases

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies - Interdependence of Three Principal Variables Drilling Activity vs Oil Price Future Price Perception Drilling Activity not Price Dependent (many large reserve fields to discovered) wells

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies - Interdependence of Three Principal Variables Oil Reserve Replacement vs Oil Price Reserve Replacement not Price Dependent

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies - Interdependence of Three Principal Variables Oil & Gas Reserve Replacement vs Drilling Activity (excludes HPBG Infill Drilling & Reserves) Average Finding Cost State: $9.59 / NEB NW KS: $28.69 / NEB SW KS: $3.99 / NEB Reserve Replacement not Activity or Price Dependent (many large reserve fields to discovered)

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies - Historical Trends of Kansas Oil & Gas Production ‘87 to ‘96 Average Typical Lease 34,296 bbls ‘87 to ‘96 Average Largest Lease 1,296,483 bbls EUR Oil for New Discoveries Largest and Typical Lease

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies - Historical Trends of Kansas Oil & Gas Production ‘87 to ‘96 Average Typical Lease 471,112 mcf ‘87 to ‘96 Average Largest Lease 6,511,460 mcf EUR Gas for New Discoveries Largest and Typical Lease

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Future Strategies Types of Exploration Strategies Which Companies have the Lowest Finding Costs ? Corporate Strategies companies with discoveries > 500 mNEB EUR (over 10 years) companies with lowest finding costs Which Counties produce the greatest EUR per Foot Drilled ? Geographical Strategies counties ranked by EUR and Finding Cost Which Formations yield the Largest Reserves ? Reservoir Strategies historical and recent percentage contribution

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Corporate Strategies - Success & Failure at Three Different Budgets Total Footage ~ 1,700,000 Ft Total Footage ~ 1,000,000 Ft Total Footage ~ 400,000 Ft

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Corporate Strategies - Large Exploration Budgets Major Oil Co EUR 27.9 mmNEB $2.41/NEB Large Independent EUR 16,6 mmNEB $3.69/NEB Lots of Wells Oil Co EUR 2.0 mmNEB $27.77/NEB Spatial Distribution of Exploration & Production Company Total Footage Drilled ~ 1,700,00 Ft 1987 to 1996, No HPBG Infill Company New Reserves Est Drlg & Comp Cost Spatially Limited to NW KS Very Low Success Rate Narrowly Focused on LGKC Reservoir

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Corporate Strategies - Medium Exploration Budgets Major Oil Co EUR 14.2 mmNEB $2.51/NEB Dryhole Oil Co EUR 1.36 mmNEB $26.02/NEB No Dryhole Oil Co EUR 1.2 mmNEB $28.94/NEB Spatial Distribution of Exploration & Production Company Total Footage Drilled ~ 1,000,00 Ft 1987 to 1996, No HPBG Infill Company New Reserves Est Drlg & Comp Cost Spatially Limited High Completion Rate Focused on Depleted Reservoir Spatially Unlimited Very Low Success Rate Poorly Focused on Reservoir

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Corporate Strategies - Small Exploration Budgets Small Independent EUR 10.1 mmNEB $1.58/NEB “Arbuckle” Oil Co EUR 0.6 mmNEB $22.20/NEB Small Independent EUR 2.5 mmNEB $4.84/NEB Spatial Distribution of Exploration & Production Company Total Footage Drilled ~ 400,000 Ft 1987 to 1996, No HPBG Infill Company New Reserves Est Drlg & Comp Cost Spatially Limited Focused on Single Reservoir

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Corporate Strategies - Companies with Lowest Finding Costs Cost Calculation DepthCompDry$/Ft >4500$45$30 <4500$40$25 <2500$35$20 Reserves Discovered Outside Hugoton Field

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Geographical Strategies

Kansas Counties Finding Cost ( Drlg & Comp Cost / EUR NEB ) 1987 to 1996, No HPBG Infill Hugoton Embayment $3.79 average WC & SC Kansas $17.92 average

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Reservoir Strategies

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Summary Formation Strategies Best Oil & Gas Producing Formations* FormationTotal Oil Disc.Total Gas Disc. % of Discoveries w/% of Discoveries w EUR > 83 mboEUR > 500 mmcf Morrow %32% Missisippian %7% Lansing-Kansas City %2% Marmaton %3% Arbuckle36805%0% Cherokee30405%0% Viola122526%4% Simpson6108%0% Wabaunsee49306%10% Shawnee0760%5% Atokan0530%6% Niobrara0350%6% * 1987 to 1996

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Summary Geographical Strategies Excellent Opportunities in almost All Counties 56 counties had at least 1 oil discovery with Lease EUR > 83,000 bbls. 30 counties had at least 1 gas discovery with Lease EUR > 500,000 mcf. County# of Oil Disc.* County# of Gas Disc.* FINNEY43SEWARD84 HASKELL34MORTON81 MORTON25 STEVENS64 SEWARD20 MEADE38 STEVENS18 STANTON34 NESS18HASKELL30 KEARNY17 BARBER24 STANTON17COMANCHE14 WALLACE13 RENO5 STAFFORD12 CLARK5 * 1987 to 1996, > 83 mbo or 500 mmcf

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Summary Corporate Strategies Future Exploration Programs…. Efficiently Budgeted, Spatially Limited, with Proper Reservoir Focus …will have the Lowest Finding Costs* >Operators Drilling > 50,000 ft/yr. ( wells/yr.) Average Finding Cost $12.79/bblRange($/bbl): $2.41 to $28.94 Need to focus on Southwest Kansas Large Operators active outside of SW Kansas ALL have Finding Cost > $10/bbl (most above $20/bbl) >Operators Drilling < 50,000 ft/yr. Average Finding Cost: $9.04/bblRange($/bbl): $1.51 to $24.06 >Operators Drilling < 20,000 ft/yr. Average Finding Cost: $6.22/bblRange($/bbl): $2.34 to $11.04 * unless you happen to own leases in the Hugoton Gas Field

Kansas Oil and Gas Exploration - 10 Year History & Future Strategies Final Slide Acknowledgements Kansas Geological Survey for support of this research Kansas Corporation Commission furnishing well completion data Kansas Department of Revenue furnishing oil and gas production data