Nebraska Oil Prospect Development

Fossil Energy is expanding its areas of exploration and operation from Kentucky to Nebraska in order to create a more diversified portfolio of operations which will allow the company to exploit potential high yield, low cost drilling and production opportunities.

The exploration program will take place in and around existing historical fields of oil production in Nebraska, and will include some areas that have not been extensively explored. The technologies that Fossil will be using are very well suited to the somewhat elusive subtle trapping mechanisms of the D and J sand formations of the Denver Julesburg (DJ) basin of Southwestern Nebraska.

Nebraska offers many advantages for a small to midsize oil company in that it has the potential of providing substantial reserves in high porosity and permeability zones for a relatively low drilling cost. According to the U.S. Geological Survey, there are an estimated 104.23 million barrels of oil, 2,519 billion cubic feet of gas and 51.81 million barrels of natural gas liquids of recoverable reserves in the DJ Basin. They estimate that 38 percent of that is located in the D and J Sands where Fossil intends to concentrate its efforts.

Typical initial production rates for these wells range in the 40 to 100 BBL per day range, however many wells have been drilled in the past that produced 200-2000 BBL per day. More importantly, wells drilled in this area can achieve cumulative production numbers of 100,000 to 500,000 BBL total per well, over the entire productive life of the well.

Geology and Reservoir Characteristics
The DJ Basin consists of about 1,500 oil and gas fields. There has been intensive production since 1950. From 1950 to 1966, the basin was the site of the most intensive development in the Rockies. More than 52,000 wells have been drilled in the basin. Drilling is focused in the central part of the basin with limited exploration in the northwestern and southern parts of the basin.

The primary producing formation in the DJ Basin is the lower Cretaceous Muddy “J” Sandstone. Conventional reservoirs in the “J” sandstone consist primarily of stratigraphic traps but structural traps or a combination of both have been found and exploited.

The Cretaceous “J” sand is channel sand which exhibits relative high porosity and permeability characteristics in Southwestern Nebraska. The “J” sand does have a great deal of variability over the vast Denver-Julesburg Basin, however, it has been proven to be a prolific oil producer in this part of the basin. In other parts of the basin, the “J” sand is much tighter, and is primarily explored for natural gas. The depth of the formation in this area is between 6,500’ and 7,000’.

Structural control or trapping environments are complex and varied, which has resulted in many dry holes being drilled in the area, however, once a subtle structural dome or stratigraphic pinch-out lens is indentified, many wells can be drilled on the structure to exploit the reserves contained therein.
The “J” sand in this area ranges from 12 feet to over 30 feet thick and can contain as much thickness of pay zone with a porosity of 15% to 25% and generally very high relative permeability.

Denver-Julesburg Basin
The Denver-Julesburg Basin is one of the largest oil producing basins in the lower 48 states. The basin spans from the east side of the Rocky Mountains into Western Kansas, and from Southern Colorado north into Southeastern Wyoming and Southwestern Nebraska.
The basin itself forms a petroleum province. Oil and gas have been produced from the Denver Basin since the discovery of oil in fractured Pierre Shale at the Boulder oil field in Boulder County, in 1901. The great majority of Denver Basin oil and gas fields produce from Cretaceous sandstones, although the Permian Lyons Sandstone is also a producer. Oil has also been produced from Pennsylvanian limestone in the Nebraska part of the basin as well.

The Wattenberg Field, one of the largest natural gas deposits in the United States, is a basin-centered gas field just north of the Denver metropolitan area. The field has produced more than 4.0 trillion cubic feet (TCF) of natural gas from the J Sandstone, Codell Sandstone, Niobrara Formation, Hygiene Sandstone, and Terry Sandstone (all Cretaceous). In 2007, the field made 11 million barrels of oil and 170 billion cubic feet (BCF) of gas from more than 14,000 wells,[making it the 9th largest source of natural gas in the United States.

This basin still has substantial reserves in place and will continue to be a source of domestically produced oil and gas for decades in the future.

Aerial Electromagnetic Survey

Three technologies will be applied as the identified areas of interest are explored in more detail. Fossil is utilizing Airborne Audio Electromagnetics over a contiguous 3 county area in Southwestern Nebraska. This exploration tool not only can identify areas of hydrocarbon concentration, it can provide accurate depth information on where the hydrocarbons are located. In addition to this, surface confirmation work will be done to verify the airborne data. Surface radiometric surveys will be conducted, as well as geochemical analysis. These three exploration technologies will allow Fossil to minimize the risk of drilling dry holes, and will allow Fossil to drill in areas where the highest potential total production can be achieved. Fossil will also have access to existing Geophysical Data, and where necessary, can have older data reprocessed with modern computer modeling programs to enhance our selection of drilling targets.

Area Map of Proposed Aerial Survey

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Fossil Energy will focus its initial Aerial Electromagnetic Survey in the counties outlined above. From West to East, the counties that will be explored are: Kimball and Cheyenne counties, and the southern portions of Banner and Morrill.

The aerial survey will be conducted by flying a repeating pattern of approximately one half mile increments in a grid pattern. The exploration team can cover approximately 400 nautical miles per day. The area that is represented here is approximately 50 nautical miles by 30 nautical miles. If an area of special interest is found on the first round of data gathering, additional, tighter spaced aerial paths can be flown in a small area of focus with very little flight time.