Vermillion Basin – Wyoming
Kodiak recently commenced drilling operations on the North Trail-State #4-36 (100% working interest [WI] -- Kodiak operated), which is expected to be drilled to a total depth of 14,625 feet to evaluate the natural gas potential of the Baxter Shale and Frontier and Dakota sands. Surface casing has been set to 1,812 feet and the well is currently drilling below 4,700 feet. Drilling operations are expected to be completed in early December. The nearest third-party production from the targeted formations, the Trail #31 in which Kodiak has no interest, is approximately three miles southwest of the North Trail-State #4-36. The Trail #31 well was placed on production in May 2006 with an initial flow rate of 3.8 million cubic feet of natural gas (MMcf) per day.
In other activity in the immediate area, the Trail #30 well, in which Kodiak has no interest, is currently drilling three miles west of the North Trail State #4-36. Permitting is in process for the NT #1-33 (100% WI -- Kodiak operated) located three miles west of the North Trail State #4-36 and one mile north of the Trail #30. Subject to BLM winter drilling restrictions the Company believes that this well could be drilled immediately after the North Trail State #4-36 in December.
Kodiak participated in the development drilling of two shallow wells drilled to 6,000 feet to develop the Almond Sands in the Chicken Spring Unit (50% WI-non operated) as part of a three well program. Drilling of the third well has commenced.
Williston Basin -- North Dakota and Montana Grizzly Prospect -- McKenzie County, North Dakota
Completion operations were successful on the Grizzly Federal #4-11H well, (62.5% WI -- Kodiak operated) located McKenzie County, N.D. Three laterals were drilled in the well with a total of 14,000 feet open in the Bakken Formation. The well initially tested at a calculated rate of 600 barrels of oil per day (BOPD) and 300 thousand cubic feet of natural gas per day (Mcfg/d). Due to constraints on surface production facilities the well has been choked back to a 6/64ths inch choke with flowing tubing pressure of 2460 psi. The well is currently producing at a rate of 225 BOPD and 100 Mcfg/d. The Company intends to install additional production facilities so that the well can flow at higher volumes.
Two miles directly east the Company is preparing to fracture stimulate the Grizzly 13-6H well (62.5% WI -- Kodiak operated). The well was placed on production in late July. Kodiak is currently drilling the Grizzly Federal #1-27H well (62.5% WI before payout -- Kodiak operated) with a surface location three miles north of the Grizzly Federal #4-11H well. The drilling program for the well projects one 9,000 foot lateral well bore in the Bakken Formation Drilling of the well is projected to be completed in late November. The Grizzly Federal #1-27H well will be Kodiak's final Bakken well in the 2006 drilling program. The Company has identified three additional development locations to drill in 2007 in the immediate area.
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