1. 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 1,000,000 100,000 MCF/Mnth BBLS/Mnth 1987198819891991199019921993199419951996 YEAR Entire State Hugoton Embayment Infill ‘97 ‘98 3661 3060 2864 3616 298 388 409 423 260 192 3152 2394 2034 1863 1752 1513 242 409 461 309 326 143 833 1622 49 61 2.0

2. 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

3. 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

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

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

6. 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

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

8. 1987 to 1996 Well Completions by County (No HPBG Infill Wells) Hugoton Embayment WC & SC Kansas Eastern Kansas

9. 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 146.8 mmNEB WC & SC Kansas 47.7 mmNEB Eastern Kansas 15.2 mmNEB

10. 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

11. 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 560.0 BCF WC & SC Kansas 88.8 BCF Eastern Kansas 43.0 BCF

12. 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

13. 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) 1998 833 wells

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

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

25. 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

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

30. 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 Morrow57865616%32% Missisippian124010917%7% Lansing-Kansas City6602328%2% Marmaton3473378%3% Arbuckle36805%0% Cherokee30405%0% Viola122526%4% Simpson6108%0% Wabaunsee49306%10% Shawnee0760%5% Atokan0530%6% Niobrara0350%6% * 1987 to 1996

31. 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

32. 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. (10 - 15 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

33. 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