Kodiak Drills Ahead Williston Basin

Williston Basin
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Kodiak provided an interim update on its Williston Basin oilfield activities.

Kodiak currently operates a two-drilling-rig program in the Williston Basin, with one rig running in Dunn County, N.D. and the second rig drilling ahead in McKenzie County, N.D. The Company also continues to participate in wells drilled by other operators throughout the Williston Basin. Basin-wide, Kodiak currently has four operated wells and three non-operated wells awaiting completion during the second half of 2010.

Bakken Development: Dunn County, N.D.

Bakken producer with 4,330 foot lateral has initial production (IP) rate of 1,517 BOE/d

The Moccasin Creek (MC) #13-34-3H well [Kodiak operated - 60% working interest (WI) / 49% net revenue interest (NRI)], a 4,330-foot horizontal lateral, was successfully completed in 11 stages in early June 2010. The well recorded 24-hour initial production rates of 1,370 barrels of oil per day (BOPD) and 858 thousand cubic feet of natural gas per day (Mcf/d), or 1,517 barrels of oil equivalent per day (BOE/d). Kodiak completed the 24-hour production test utilizing a 22/64" choke with flowing casing pressure of 1,750 psi. Since coming online in early June 2010, the well has cumulative production of 9,500 barrels of oil (BO) and 10,500 BOE in the first 12 days of production.

"This well again demonstrates the continually improving efficiency of our completion operations with strong results from a short lateral well that rivals previous results from longer lateral wells, said Kodiak's President and CEO Lynn Peterson. "These results heighten our anticipation of our long lateral wells that we expect to complete in the coming weeks."

Kodiak currently has three additional operated Bakken wells in Dunn County awaiting initial completion operations. The MC #13-34-28-1H well (KOG operated -59% WI / 48% NRI), a 9,769-foot horizontal lateral, is scheduled to be completed mid July.

The MC # 13-34-28-2H (Kodiak operated - 59% WI / 48% NRI) is an 8,600-foot horizontal lateral directly offsetting the MC#13-34-28-1H well discussed above and is expected to be completed in August. Also awaiting completion is the Two Shields Butte (TSB) #14-21-4H (Kodiak operated - 50% WI / 41% NRI) which is a 4,500-foot horizontal lateral. This well is the first well drilled from the TSB four-well pad.

Kodiak is currently drilling ahead on the TSB # 14-21-16-2H (Kodiak operated - 50% WI / 41% NRI), a projected 9,000-foot lateral targeting the Bakken Formation in Dunn County. This well is the second of four wells being drilled from the TSB drilling pad, one of which is planned to test the productive potential of the Three Forks Formation. It is expected that these four wells will be completed in the fourth quarter of 2010.

Commenting on Dunn County, N.D. drilling and completion activities, Peterson continued, "We continue to improve our completion efficiencies on the east side of the Nesson Anticline. We carefully monitor the flowback rates on our wells, as production history analysis suggests that smaller choke size results in better reservoir management. Choke sizes and pressures are included in the well discussion above to allow investors to better evaluate our wells. Our frac design employs a high concentration of ceramic proppant. By using smaller choke sizes and maintaining back pressure on the formation during flowback, we believe we can retain the maximum amount of proppant in the formation, which we expect will improve the well's production profile.

"We believe we can further document the effectiveness of ceramic proppant as our wells are flowing naturally for extended periods of time, in some cases in excess of one year. Based upon extensive frac stimulation modeling work, we have concluded that frac stage intervals of 350 feet to 500 feet are an effective strategy for recovering hydrocarbons. We believe the number of stages is only one factor in the success of our wells because proppant type, proppant volumes and fluid selection are equally important parts of successful completions. As we obtain additional production history from our Dunn County wells, we continue to evaluate and upwardly adjust our internal estimated ultimate recoveries (EURs)."

McKenzie County, N.D.

In the Grizzly project area, located in the Mondak Field of the southeastern Elm Coulee trend, the Grizzly #13-6-H (Kodiak operated - 68% WI / 56% NRI) was re-entered during June 2010 and a 3,700-foot lateral was drilled horizontally in the Bakken Formation and is currently awaiting completion. Kodiak expects to complete the well during the third quarter 2010.

Kodiak is moving the drilling rig to the Grizzly Federal #1-27RH well (Kodiak operated - 74% WI / 60% NRI), a proposed 9,600-foot horizontal lateral test of the Bakken Formation. The well is a twin to the Grizzly Federal #1-27 well, which was drilled and completed in 2007 using single-stage fracture stimulation procedures.

During the second quarter of 2010, Kodiak acquired approximately 3,397 gross (2,038 net) additional acres in its Grizzly project area that are prospective for Bakken and Three Forks oil production. Some of the acquired lands have been included in five 1,280-acre drilling units, four of which are operated by Kodiak and the fifth by a major oil company with an extensive Williston Basin leasehold concentration. Kodiak's working interest in the newly acquired lands ranges from 50% to 60%. The Company anticipates that drilling will commence on its operated units during the second half of 2010, subject to the ongoing federal permitting process.

With the recent acquisition, combined with the previously announced acquisition of acreage in the Koala project area, Kodiak's current McKenzie County leasehold now totals 13,430 gross and 9,565 net acres.

Commenting on McKenzie County operations, Peterson stated: "We believe that current, proven completion technology could add significant reserves to this area of the Elm Coulee Field. We anticipate operating up to five additional wells in McKenzie County in the coming quarters as we evaluate the productive potential of this highly prospective leasehold."

Red River: Eastern Montana - Sheridan County, Mont.

Vertical Red River producer IPs at 287 BOPD

The Meagher #16-30 Red River test well (Kodiak operated - 34% WI / 27% NRI) was successfully completed in the lower burrowed and in the upper laminated intervals of the Red River "C" zone in mid-June 2010. The well recorded 24-hour initial production rates of 287 BOPD. Kodiak performed the 24-hour production test utilizing a 32/64th" choke with flowing tubing pressure of 75 psi. This seismically defined structure was drilled vertically to a total depth of 11,300 feet and is expected to provide steadier and more and predictable production rates as opposed to the steeper declines experienced by Bakken wells.

The Harshbarger #13-20-29 (Kodiak operated - 43% WI / 34% NRI) was also recently completed in the upper laminated interval and production testing is continuing at this time. This seismically defined structure was drilled vertically to a total depth of 11,408 feet.

Commenting on the Red River operations, Peterson said, "Vertical Red River wells are typified by very different reservoir characteristics and completion methods than the Bakken wells we are drilling in North Dakota. These seismically defined wells can provide strong EURs and attractive per-well economics given their lower drilling and completion costs of nearly half of the costs for a horizontal Bakken producer since the wells do not require any fracture stimulation procedures."

As of June 30, 2010, Kodiak's total Williston Basin leasehold, located in Dunn, Mountrail and McKenzie Counties, N.D. and Sheridan County, Mont., totaled 90,720 gross (57,128 net) acres in this highly prospective play.


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