Credo Installs Calliope System on 2 Wells in Oklahoma

CREDO Petroleum provides an its Oklahoma drilling and its Calliope Gas Recovery System activity.

Drilling Continues to Yield Successful Results

Drilling Results. The company drills primarily for natural gas on its 40,000 gross acre inventory located along the northern shelf of the Anadarko Basin of Oklahoma. During fiscal 2004, the company has drilled eight wells in this area with an 88% success rate. Three previously reported wells have been completed for production. One additional well is awaiting completion and pipeline connection. All of the completions occurred after second quarter-end. Seven new wells are currently on the summer drilling schedule.

The Rosalee #1-9 was recently drilled on the company's 17,000 gross acre Sand Creek Prospect located in Ellis and Harper Counties, Oklahoma. It is the 21st well drilled on the prospect, and established production about one mile west of the Bobby John #1-10. The 7,825-foot well encountered 10 feet of porous Morrow sand and is currently producing from a natural completion on an 18\64-inch choke at a daily rate of 1.15 MMcfg (million cubic feet of gas per day). A north offset has been permitted. CREDO is the operator and owns a 26% working interest.

About one mile to the west, the company drilled a north offset to a new oil discovery flowing in excess of 100 barrels of oil per day from the Oswego limestone formation. The well resulted in a dry hole. The company has a very small working interest in the discovery well.

Approximately seven miles to the north, the Eva #1-34 was recently completed on the company's 6,000 gross acre Two Springs Prospect in Harper County. It is the seventh well drilled on the prospect and extended Morrow sand production about one-half mile north of the Gillenwaters #1-34. The 7,200-foot well encountered seven feet of porous Morrow sand with excellent pressure. Prior to fracture stimulation, it is producing from a natural completion on a 24\64-inch choke at a daily rate in excess of 700 Mcfg (thousand cubic feet of gas). CREDO is the operator and owns a 34% working interest.

Approximately eight miles to the north, the Owens #1-21 has been completed as a new oil discovery on the company's 2,560 gross acre Buffalo Creek Prospect in Harper County. The 6,900-foot well encountered 14 feet of porous Oswego limestone and is currently producing on pump at the daily rate in excess of 100 barrels of oil and 100 Mcfg. This well is also awaiting stimulation. CREDO is the operator and owns a 31% working interest. Two additional wells are being permitted for drilling and more wells are expected.

About 11 miles east of the Rosalee, the company has drilled the first well on its 1,920 gross acre Horseshoe Prospect in Harper County. The 7,200-foot well encountered six feet of porous Morrow sand. Drilling data and electric logs indicate that it will be productive and it is awaiting completion and pipeline connection. CREDO is the operator and owns a 49% working interest.

Planned Drilling Activity. Seven additional wells are currently on the summer drilling schedule. A rank wildcat will test the company's new 1,920 gross acre Glacier Prospect in Harper County, Oklahoma. The prospect is located about five miles east of the Sand Creek Prospect. CREDO will operate five of the scheduled wells and is currently waiting on rig availability which is anticipated in July.

New Calliope Installations

This year, the company has installed its Calliope Gas Recovery System on two wells located in Oklahoma. Four systems are scheduled for installation.

The two completed installations are prototypes to test Calliope on wells with known reservoir damage caused by the "parting shots" of previous operators. These prototypes represent very rigorous challenges for Calliope which could further expand its application envelope. The company is performing a group of reservoir treatments designed to mitigate the reservoir damage. Such procedures are generally not practical in low pressure reservoirs because the treatment fluids load-up the well and are often impossible to recover. Calliope can normally remove the fluids, thus substantially increasing the probability of successfully treating low pressure reservoirs. CREDO owns an 80% working interest in the wells and is the operator.

The company is preparing to install Calliope systems on four additional wells. These wells are all located in Oklahoma and range in depth from 7,800 to 12,000 feet. They had cumulative production ranging up to 16.1 Bcfg (billion cubic feet of gas). All of the wells were dead at the time of purchase. These Calliope installations are expected at the rate of about one per month barring any delays caused by a backlog for field services.

Calliope has proven to be reliable and flexible over a wide range of applications on wells the company owns and operates. It has also proven to be consistently successful. This has resulted in an impressive track record for the new technology. Accordingly, the company has recently begun implementing strategies to substantially increase the number of wells on which Calliope will be installed.

Management Comment

James T. Huffman, President, said, "We are pleased with the progress on both of our core projects. Our drilling continues to yield good results as we expand onto new prospects and continue to develop existing prospects." Huffman further stated, "We have also made substantial progress on our strategies to better monetize the potential of our Calliope Gas Recovery System."