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March 2006, FIRST QUARTER 2006 – EXPLORATION AND PRODUCTION NEWS

GALION EXTENSION PROSPECT, CAMPBELL COUNTY, WYOMING

Since April 2005, development activity has focused primarily on Section 28 where an extensive oil structure was discovered. Trend has suggested naming this oil field, the Paul’s Draw field.

First, progressive cavity pumps were installed in the existing three Minnelusa C sand producers allowing significant daily oil and water volumes to increase in this Section.

Second, the drilling of the Trend Federal #28-4 well encountered a Cretaceous sand level called the Muddy Sand (Lower Ute Member) that appeared potentially productive.
Due to this reason, the Trend Federal #44-28 well was drilled in an optimum location to exploit the Muddy Sand in this area. The Trend Federal #44-28 well was drilled in November/December 2005 and reached a total vertical depth of 6,925’ (2,111m). Although a non oil show was encountered while drilling the electric log indicated a 5’ thick interesting section which was perforated and put on line. First swabbing gave an initial flow of 10 barrels of oil per hour. A conventional “donkey” pumping unit was installed and the present production rate is approximately 260 barrels of oil per day.

The Trend Federal #28-5 well, an offset to the Trend Federal #28-4 well, was drilled in February 2006 and reached a total vertical depth of 8,653 feet. Although the Minnelusa sands were present they were structurally lower than what was expected. Unfortunately, the sands were water saturated; however, the well will be utilized as a disposal well.

In order to better define the postulated trend between the Jazbo and Paul’s Draw fields, Trend will possibly drill a new well in Section 17 during 2006.

CALVERT PROSPECT, ROBERTSON COUNTY, TEXAS

The Seth Burnitt #1 well (5,000 feet) was drilled in April 2005. The objective was the Buda limestone reservoir. A very low porosity was encountered and confirmed by the electric logs which lead the operator to plug and abandon this well.

Magnolia Petroleum Corporation drilled the Hill-Anderson #1 well in 1943. This well encountered 30 feet of gas productive Cotton Valley Sand (CVS). The 3D seismic reprocessing and its reinterpretation confirmed a CVS prospect extending from the Cristina #1 well updip to and including this old well.

Thus, one of the partners, Houston Petroleum Corporation (HPC) re-entered this well in order to re-evaluate the CVS section with modern electric logging tools. Unfortunately the re-entry was unsuccessful primarily due to significant hole instability.

HPC proposed the drilling of a Navarro and Gibson Sand objective well, the C.A. Anderson #2 well. HPC became the new operator for this specific well and Texican Oil decreased its working interest to 31.85%. This well reached a total vertical depth of 2,750 feet (838 m). The lack of oil and gas show while drilling, the sidewall cores and the electric logs confirmed the very low porosity of the objectives. An unsuccessful completion was attempted in the shallow Wilcox Sands formation (350 feet; 107 m). Due to the dismal results encountered, the well was plugged and abandoned.

During 2006, CALGAS LLC envisions installing additional compression near the Burnitt Dehydration Station to reduce the operating pressure to 30 psi for the Arbol Buda gas wells. The operator plans to perform several remedial acid jobs to increase/maintain the existing production. As of February 2006, the exploration acreage in Calvert expired and all that remains is the acreage held by production for the existing eight (8) wells.

BALL RANCH PROSPECT, KENEDY COUNTY, TEXAS

Since the first quarter of 2005, Texican Oil drilled four new wells on the Western part of the Ranch. No wells were drilled on the Eastern part of the Ranch.
Texican Oil has produced gross 20 billion cubic feet of gas in exactly four years.

Western Part

The Clark & Sain #14 well was drilled north of the field in July/August 2005 to develop the Queen Elizabeth sands. The well reached a total depth of 12,030 feet (3,667 m) and encountered numerous gas shows while drilling. A 43’ thick net pay level was fractured and completed. A production string was installed three months after the initial production. Presently the production rate is approximately 700,000 cubic feet of gas per day.

The French State #1 well was drilled in August/ September 2005 and reached a total vertical depth of 14,460 feet (4,407.40 m). A potentially productive Vicksburg sands level was encountered, fractured and completed. The cumulative gas production has exceeded one billion cubic feet of gas since October 9th, 2005. The current production rate is greater than 6,000,000 cubic feet of gas per day.

The Clark & Sain #15 well was an exploration well whose goal and objective was to test the older and deeper Vicksburg sands located west and below the main fault of the field. This well reached a total vertical depth of 18,003 feet (5,487.30 m). Sands encountered were of very low permeabilities and gas shows very weak. Nevertheless Texican participated in the failed completion attempt and the well was plugged and abandoned as a non commercial well.

The Clark & Sain #16 well offsetting the French State #1 well reached a total vertical depth of 15,500 feet (4,724.40 m). The productive sands encountered in the French State #1 well were present; however, the sands exhibited low permeability and will not be perforated. Numerous gas shows were observed while drilling and others sands levels are currently being completed and evaluated, more particularly the third and fourth Vicksburg sands which have a well-developed thickness.

EXXONMOBIL JOINT VENTURE (NORTH JULIAN PROSPECT/BALL RANCH AREA)

The Clark & Sain #12 well, completed in April/June 2005, has produced greater than one billion cubic feet of gas in eight and a half months. A production string was installed in November 2005. The current production rate is greater than 2,600,000 cubic feet of gas per day.

The King Ranch State #136-1 well, drilled in May/June 2005, reached a total depth of 16,556 feet (5,046.40 m). Numerous gas shows were encountered while drilling. In general, the permeability of the sands appeared lower when compared to the sands in the Ball Ranch wells. There were several potentially productive sand levels, spread out over a greater than 4,000 feet height (1,220 m). These sands were commingled and tied-in after fracturation in mid-December 2005. The well has cumulative production of 0.186 billion cubic feet of gas through January 2006. The current production rate is approximately 3,300,000 cubic feet of gas per day.

Presently the Ball Ranch #7 well is being drilled and the proposed total depth is 15,500 feet. This well is an up-dip well to the King Ranch State #136-1 well.

CHOKE CANYON PROSPECT, LIVE OAK COUNTY, TEXAS

The sale of the Choke Canyon prospect is under negotiation and closing is scheduled for May 1, 2006.

BOOKER 3D PROSPECT, LIPSCOMB/OCHILTREE COUNTIES, TEXAS

The operator Red Willow Mid Continent LLC acquired the 3D seismic in July/August 2005. The initial reprocessing of the dataset was finalized in mid-December 2005. Presently the seismic interpretation is under way and at least two definitive channels have been mapped; however, the seismic data processing continues. The drilling of the initial well should begin before the end of the first semester 2006.

NEFF PROSPECT, BRAZORIA COUNTY, TEXAS

The initial well of the prospect, the Neff Geissen #1 well, was drilled in December 2005 and reached a total depth of 8,900 feet (2 713m). The Middle Frio sands were water-bearing sands. Thus the well was plugged and abandoned.
Unfortunately this prospect was unsuccessful.

WELDER RANCH PROSPECT, VICTORIA COUNTY, TEXAS

The initial Vaquero #1 well was drilled in February/ March 2005 to a total depth of 13,920 feet (4,243 m). The well was completed after fracturation in June 2005. As of March 2006 the well has produced approximately 22,800,000 cubic feet of gas. The well is currently flowing 140 thousand cubic feet of gas per day.

The second well, the Vaquero #2 well, targeting the Middle Wilcox gas sands, was drilled from April through mid-June 2005 to a total depth of 12,440 feet (3,792 m). Due to numerous mechanical drilling issues the well was sidetracked to a total depth of 12,400 feet (3,779.50 m). This well penetrated the Rincon sand and experienced a gas kick. The Rincon sand was completed on August 1st, 2005, without fracturation. The well was fractured in December 2005. The well has cumulative production approximating 0.2 billion of cubic feet of gas through March 2006. The current production rate is approximately 350 thousand cubic feet of gas per day.

Vaquero Oil and Gas, Inc has been replaced as operator by Dune Energy, Inc.

Future plans are to drill two deep wells and possibly additional shallow wells. Two wells must be drilled and completed by September 1st, 2006. Due to the prior drilling problems encountered, a decision was taken to reduce any future drilling exposure (by 75%) on any and all subsequent wells.

ESTABAN PROSPECT, NOLAN COUNTY, TEXAS

A risky re-entry was proposed in May 2005 in order to test the concept of separated reef reservoirs (upper Canyon section and lower Cooper and Moore sections). Texican Oil decided not to participate in this re-entry. Therefore, all rights, title, and interest were lost and the prospect was abandoned.

MARACAS FIELD, CESAR BASIN, COLOMBIA

The various possibilities of gas exploitation are still being studied.