JayHawk Re-Examines Existing Wells, Boosts Production

JayHawk provided an update on its recent drilling activities on its Crosby, North Dakota, acreage as well as developments on its Kansas shallow gas holdings.

Both wells drilled in the Crosby, North Dakota, Madison formation oil play of the Williston Basin were cased and placed on production in April. While the Jenks #1 well initially produced only water, a follow-up workover was successful in shutting off the water zone and returned the well to oil production. Both wells are producing at lower than expected fluid volumes, which has translated into lower oil production than anticipated. The Company is considering fracturing one or both wells in order to stimulate increased flow rates.

JayHawk is currently evaluating follow-up locations for future development drilling on its nearly 15,000 acres in the Crosby area. In order to increase efficiencies in operations, the Company is planning to consolidate the seven single well batteries currently utilized for processing into a single production battery that will service multiple wells. This change will reduce the costs of operating multiple wells. Once the consolidation is completed, the Company plans to sell-off equipment identified as excess and no longer needed for production.

In light of the recent 'firming up' of natural gas prices, the Company is re-examining the potential for increased production from its shallow gas acreage located in Kansas. Our operating partner has begun the field work necessary to enhance productivity of the existing wells, and JayHawk has performed the necessary upgrades to the gas gathering system to alleviate bottlenecking on its pipeline. These changes should stabilize production rates going forward and may allow the Company to increase production through improving existing well flow rates and the selective drilling of new wells. Any future production enhancements will likely be funded through operating revenues and/or the exercise, by our operating partner, of their option to acquire an additional forty-two and one-half percent (42.5%) interest in our Kansas holdings. That option expires in late September of this year.

The Company is also looking at the potential acquisition of oil production properties in Kansas. If the Company is successful in increasing gas production from its Kansas holdings, the combination of both oil and gas production will create a secondary core production area for the Company.

In summary, the Company is looking toward enhancing production from its existing wells in North Dakota as well as achieving greater efficiencies of operations in this project. JayHawk is also re-examining its gas portfolio in Kansas and looking to further exploit its gas resources, jointly with its partner, and augmenting that production with an acquisition of a producing oil property in Kansas as well.