RELIANCE OIL & GASRELIANCE OIL & GAS
Hammerhead Lease Prospect
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CORPORATE OVERVIEW
Reliance Oil and Gas, Inc. is an oil and gas drilling, operating and explora-
tion company, incorporated under the laws of the State of Texas on July 1,
1985. The company has in excess of $100,000,000 in proven oil and gas
reserves. The company is a fully licensed and bonded oil and gas driller
and operator in the State of Texas. The company is a full service drilling
and operating company,with two drilling rigs and two work over rigs in its
fleet, along with all the ancillary oilfield servicing equipment necessary to
be a full service driller and operator.The Company will conduct its drilling,
production, acquisition, development and exploration activities in areas
in which it is experienced and knowledgeable in the particular geological
basins and use that experience and knowledge to create strategic
alliances with qualified industry partners. The Company’s strategy will be
to increase its reserves and cash flow through drilling, production, explo-
ration and exploitation of its existing properties with proven reserves in
South Texas. The Company emphasizes the use of 2-D and 3-D seismic,
horizontal radial fracturing techniques, horizontal drilling techniques and
computer-aided exploration technology, together with geological and
engineering studies of its proposed properties to evaluate and prioritize
drilling prospects and production efforts. The Company will focus
production and drilling activities on its properties in a relatively concen-
trated area to permit the Company to utilize its base of geological and
engineering experience in the region to maximize drilling success and to
minimize development costs. The Company plans to continue to selec-
tively pursue acquisitions of majority working interests and operating
rights in properties that offer developmental potential as well as provide
operating synergies with existing properties.
RELIANCERELIANCEOIL & GOIL & GAASS
Guadalupe County is ninety miles inland from the Gulf of Mexico in south central Texas
and is bounded by Comal, Hays, Caldwell, Gonzales, Wilson, and Bexar counties. Cibolo
Creek forms the border between Guadalupe and Bexar counties, and the San Marcos
River separates Guadalupe and Caldwell counties. Seguin, the county seat and largest
town, is on Interstate Highway 10 and U.S. Highway 90, twenty-five miles southwest of
Austin and eighteen miles northeast of San Antonio.The county's center lies near Seguin
at approximately 29°35' north latitude and 97°57' west longitude.The county covers 713
square miles of flat to rolling terrain with local depressions and escarpments, and its
elevation ranges from 450 to 800 feet above sea level.The northwestern section, near the
border with Comal and Hays counties, is part of the Blackland Prairie; the rest of the
county lies in the Upper Coastal Plain. Soil types vary from dark, calcareous clay in the
northwest to fine,sandy loam in the southeast.Vegetation consists primarily of mesquite,
scrub brush, and grasses in drier areas of the county, while water-tolerant hardwoods
and conifers flourish near creeks. The area has a mild subtropical climate, with tempera-
tures ranging from an average high of 96° in July and an average low of 42° in January.
The annual rainfall in the county averages 33 inches, and the growing season averages
275 days.
The Guadalupe River was developed in the late 1920s and early 1930s as a source of
hydroelectric power. A series of privately owned dams channelled water through gener-
ating plants, providing electricity for the surrounding area. Lakes Dunlap and McQuee-
ney, as well as several smaller lakes, were formed by the dams and have become popular
recreational sites. Oil was discovered by H. H. Weinertqv in eastern Guadalupe County in
the early 1920s (in the Darst Creek oilfield), and although the new industry in no way
rivalled agriculture in its importance to the county's economy, it did provide some diver-
sity. The Luling, Dunlap, Darst, and La Vernia fields were still active in the 1980s. In 1982
wells in the county produced 1,693,730 barrels of crude oil and 976,823 cubic feet of gas.
Although no war supply contracts or facility projects were assigned to Guadalupe
County in the 1940s, the area did take part in the economic prosperity generated by
World War II. Manufacturing establishments in the county more than doubled the
number of their employees between 1940 and 1947. The per capita wage doubled as
well. The county's proximity to San Antonio encouraged many residents to commute. In
agriculture, emphasis continued to shift from cotton to grains and livestock as a part of
the war effort.
HISTORY OF
GUADALUPE COUNTY
RELIANCEOIL & GAS
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In the 1980s as much as 80 percent of the land in Guadalupe County was used
for farming and ranching. Among the primary crops were sorghum, hay, oats,
wheat, and corn; watermelon and peaches were also popular, and the county's
pecan production was sixth in the state. Over 70 percent of the county's agri-
cultural receipts in 1982 came from livestock and livestock products, mainly
cattle, hogs, poultry, and milk. Although agriculture continued to be a impor-
tant aspect of the economy, farm receipts represented only 12 percent of the
county's annual income in 1985. Professional and related services, manufactur-
ing, and wholesale and retail trade involved nearly 60 percent of the work force
in 1982. Mineral resources, including ceramic clay, industrial sand, oil, gas, and
lignite coal, gave residents the opportunity to diversify their interests. In recent
years many people have moved to Guadalupe County from San Antonio,
choosing to live in Guadalupe County and work in Bexar. In 1982 46 percent of
the work force was employed outside the county. Between 1960 and 1980 the
population of Guadalupe County rose nearly 40 percent, from 29,017 to 46,708;
in 1990 the population was 64,873. Local attractions include Lake McQueeney,
touted as the "water ski capitol of Texas" and numerous historic homes and
buildings.
Date Oil (BBL) Casinghead (MCF)
Dunlap Field, Guadalupe CountyAnnual Totals, Jan 1993 - Apr 2007
Guadalupe CountyAnnual Totals, Jan 1993 - Apr 2007
1993 85,101 148,050
1994 68,238 124,205
1995 77,532 126,010
1996 85,769 119,230
1997 95,690 142,049
1998 75,828 125,218
1999 64,978 106,771
2000 68,202 85,650
2001 65,186 76,467
2002 59,688 63,919
2003 52,546 54,763
2004 53,275 52,926
2005 53,850 53,234
2006 50,095 53,642
2007 7,520 7,912
Total 963,498 1,340,046
Date Oil (BBL) Casinghead (MCF)
1993 1,272,241 381,523
1994 1,262,947 347,081
1995 1,374,396 341,289
1996 1,262,138 327,730
1997 1,098,215 318,838
1998 1,326,309 262,916
1999 946,974 194,479
2000 976,074 170,404
2001 992,389 136,095
2002 894,968 106,313
2003 1,003,282 96,191
2004 1,054,514 94,289
2005 1,489,421 89,769
2006 1,416,101 97,968
2007 199,731 13,696
Total 16,569,700 2,978,581
RELIANCEOIL & GAS3
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RELIANCE OIL & GASNelson Lease Prospect
RELIANCE OIL & GASPerfetto Lease Prospect
RELIANCE OIL & GASHammerhead Prospect
Guadalupe County, Texas
Locator Map
Guadalupe CountyGuadalupe County
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90
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LULING
RELIANCE OIL & GAS4
10
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90
90
RELIANCE OIL & GASHammerhead Prospect
Guadalupe County, Texas
Dunlap Flat Field Map
Glennwood WarnakeD. Tilley #1IP 47 BOPD
Glennwood WarnakeD. Tilley #5IP 52 BOPD
Glennwood WarnakeD. Tilley #3IP 60 BOPD
*Based on reports from field personel
This diagram is for illustration purposes only and is not to scale
RELIANCE OIL & GASNelson Lease Prospect
RELIANCE OIL & GASPerfetto Lease Prospect
Dunlap Field Production History
Historically the average well in the Dunlap field has had an IP of 50 BOPD.
Oil Well
Gas Well
Dry Hole
Abandoned Oil Well
Abandoned Gas Well
KEY
IP = Initial Production
BOPD = Barrels of Oil Per Day
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90
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RELIANCE OIL & GASHammerhead Prospect
Guadalupe County, Texas
This diagram is for illustration purposes only and is not to scale
Lease Map
RELIANCE OIL & GASNelson Lease Prospect
RELIANCE OIL & GASPerfetto Lease Prospect
RELIANCE OIL & GAS
Glennwood WarnakeD. Tilley #1IP 47 BOPD
Glennwood WarnakeD. Tilley #3IP 60 BOPD
Glennwood WarnakeD. Tilley #5IP 52 BOPD
Oil Well
Gas Well
Dry Hole
Abandoned Oil Well
Abandoned Gas Well
KEY
IP = Initial Production
BOPD = Barrels of Oil Per Day
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RELIANCE OIL & GASHammerhead Prospect
Guadalupe County, Texas
Well Log Cross Section Map
1700’
1800’
1900’
2000’
2100’
2200’
2300’
1700’
1600’1600’
1800’
1900’
2000’
2100’
2200’
2300’
2350’2350’
1700’
1800’
1900’
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2100’
2200’
2300’
1700’
1600’1600’
1800’
1900’
2000’
2100’
2200’
2300’
2350’2350’
RELIANCE OIL & GASNelson Lease
Proposed Location Glennwood WarnakeD. Tilley #1IP 47 BOPD
Glennwood WarnakeD. Tilley #5IP 52 BOPD
Glennwood WarnakeD. Tilley #3IP 60 BOPD
7This diagram is for illustration purposes only and is not to scale
RELIANCE OIL & GASHammerhead Prospect
Guadalupe County, Texas
3-D Schematic
RELIANCE OIL & GASProposed Location
This diagram is for illustration purposes only and is not to scale 8
9RELIANCEOIL & GAS
THE ADVANTAGES OFHORIZONTAL DRILLING
Horizontal wells have a higher productivity and pay contact per well than verti-cal wells, thereby reducing the number of wells required to drain the reservoir. Horizontal wells allow operators to take advantage of highly heterogeneous or layered reservoirs, reservoirs with fractures, or water or gas coning problems. Horizontal wells are a controlled, directional completion technique for exploit-ing un-recovered mobile hydrocarbons in existing fields. These reserves usually remain because the reservoir’s heterogeneity has prevented efficient develop-ment using vertical wells. The primary screening tool is recovery efficiency as measured by the percentage recovered of original oil-in-place (OOIP) or original gas-in-place (OGIP). Screening is carried out by reservoir characterization, followed by reservoir stimulation.
The advantages of horizontal wells include higher productivity and a larger drainage area per well. In Texas and Louisiana, horizontal wells in the Austin Chalk have become attractive because of the relatively rapid payout from good initial production rates. The best technique currently available utilizes coiled-tubing drilling, since it minimizes problems. As a result, some drilling costs may ultimately be reduced.
The average estimated ultimate oil and gas recovery of horizontal wells in the Austin Chalk, based on the normalized profiles range from a low of 40,000 BOE per well to 300,000 BOE .
Paul Gerlach, Kansas Geological SurveyUniversity of Kansas Energy Research Center
Horizontal radial jet completion technology can horizontally drill a well bore in a “wheel and spoke like fashion” and penetrate up to 90 feet with each spoke. The technology has the ability to horizontally drill up to eight spokes in one well in only two days, as opposed to a conventionally drilled horizontal well bore going the same distance but taking up to four weeks.
Reliance Oil and Gas, inc. believes by using the new horizontal radial jet completion technology verses conventional vertical drilling to exploit their proven oil reserves on the Hammerhead Prospect they should see a substantial increase in not only the daily oil production but the total recoverable oil in the reservoir as well.
RELIANCE OIL & GASRELIANCE OIL & GAS
1873 N. Magnolia St.Luling, Tx. 78648
Tel: 214-553-1608Fax: 214-553-1609
Toll Free1-866-OIL-WELL {645-9355}1-866-GAS-WELL {427-9355}
Turning OIL & GAS FLOWinto CASH FLOW