Neon IDs Oil Shows at Paloma Deep Prospect

Neon provided the following update regarding the ongoing drilling operations at the Paloma Deep exploration prospect, in the San Joaquin Basin, onshore California.

Encouraging oil shows were observed in the Antelope Shale and Paloma Sandstone reservoirs before reaching the current depth of 10,665 feet, being the intermediate casing point. Wireline log analysis suggests the Paloma Sand holds a gross interval of 205 feet of oil saturated reservoir. The uppermost 50 feet (39 feet net oil) appears to have the best reservoir quality, and as a consequence the
Company anticipates production testing this zone after completion of the drilling program. The lower 155 feet (121 feet net oil) appears to be oil bearing shale with finely interbedded sandstones. This type of rock formation is commonly produced elsewhere in the San Joaquin Basin, however production testing will be required to determine economic viability.

Neon is highly encouraged by these results as the prospective resource (oil in place) determined from petrophysical analysis of the 205 foot oil saturated zone is approximately 3 million barrels per 40 acre well spacing. Neon estimates that this play could extend over 450 acres within the Company's leases, therefore if production testing confirms the economic producibility of the formation additional wells will be required to efficiently produce the resource.

Additional encouragement, based on preliminary analysis of wireline logs, exists in the overlying Antelope Shale and in a shallow sand which encountered minor oil shows.

After casing is set, drilling operations will continue through the Middle and Lower Stevens Sandstones, which are the primary targets for the well.

Neon is operating the well with a 75% working interest, while partner Solimar Energy (SGY) is participating with a 25% working interest. Pursuant to the terms of a Farmout Agreement, Solimar is paying a promoted share of the dry hole costs, up to an agreed cost cap.

Managing Director Ken Charsinsky commented, "We are very pleased with results thus far, and anxiously await the production testing outcome which will be the definitive test for the economic viability of these Paloma sands. As some of this section has produced in the field previously, the petrophysical evaluation from wireline logs can be optimistic, so the testing is critical. We now look forward to drilling the Middle and Lower Stevens sands which are the primary targets of the well and subsequently testing the zones of interest."


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