Enhanced Oil Updates Operations

Enhanced Oil provided the following update regarding the Company's activity for the first six months of 2011.

The Company had previously announced, on January 19, 2011, that its principal focus for 2011 is the accelerated development of the Company's oil reserves at the Milnesand, Chaveroo and Crossroads oil fields. Specifically, during 2011 the Company intends to focus on:

  • Commencing the Milnesand oil field 20-acre infill drilling program in New Mexico.
  • Continuing a long-term program of well reactivations and workovers at both Milnesand and Chaveroo oil fields.
  • Continuing to exploit behind pipe zones in existing wells in Crossroads oil field.
  • Completion of pipeline right of way for the Company's proposed 41 mile pipeline from Kinder Morgan CO2 Company LP's Cortez Pipeline to the Company's Milnesand and Chaveroo oil fields.
  • Preparation for the potential delivery of CO2 to Milnesand oil field.
  • Continued evaluation of a helium project in our St Johns field.
  • Continued evaluation of a geothermal project in our St Johns field.
  • Market and industry exposure of Enhanced Oil Resources.

Oil Field Operations

During the first six months of 2011, we have been engaged in a very active fieldwork program in New Mexico, addressing some production decreases in our Crossroads field and addressing non-compliant wells in the Chaveroo and Milnesand fields. We have been restricted by state and federal regulators from certain reactivations and operating activities which would have benefited our current cash flows, pending reductions of non-complaint wells which formerly have been allowed to exist for decades. During this period, crude oil production has averaged approximately 408 barrels of oil per day (bopd) over the first five months of 2011. At Crossroads, May production averaged approximately 287 bopd, a loss of approximately 105 bopd since December, 2010. These reductions are principally related to an erratic production pattern and scaling problems with the # 307 Devonian well and gas/oil production difficulties with the # 101 Morrow well. We have attempted two reactivations in the Crossroads field that, to date, have not yet proved successful. We are continuing to give our attention to this field which has been enormously successful over the last two years.

Since the start of the year the Company has utilized three well service rigs operating almost continuously in our oilfields to reactivate, convert or abandon non-producing wells and to date we have completed operations on 48 wells. At Chaveroo, the Company has reactivated seven wells and realized production increases from 29 bopd at the start of the year to approximately 70 bopd during May of this year. In May, the Milnesand Plan of Development (POD) for 2011 was finally approved by the Bureau of Land Management (BLM) after three submissions over a nine month period, thus allowing the re-entry of 10 wells since the approval of the POD. We have concentrated our remedial work programs to forestall increases in the number of non-compliant wells and have identified a list of non-core well bores to begin turn-key abandonment operations in July. The plugging program of 13 wells (all considered non-essential to our plans) is expected to commence as the service contractors become available and will begin to significantly reduce the number of non-compliant wells. Once this operation has been completed and paperwork filed we believe we can then begin our drilling program in the Milnesand field. Engineering design for the infill lateral wells from existing wellbores at Milnesand has been completed and we are currently soliciting vendors to commence this program as soon as approvals are received and services can be provided. At Crossroads, we will continue the process of reworking several existing wells to increase production from the Devonian and other reservoirs in an attempt to bring production back towards previous levels.

St. Johns Development

The Company is expected to sign a drilling agreement shortly for the remaining two wells required for drilling under the St. Johns unit agreement obligations. We hope to initiate that drilling program towards the end of the third quarter of this year. Both wells will be targeting the high Helium area of the field within the Amos Wash interval. We will provide further details once a drilling contract has been executed.


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