Intrepid Drilling, LLC320 Second Street , Columbia, Mississippi, United States

Intrepid Drilling, LLC acquires working interest positions and mineral rights leases for the sole purpose of oil and gas exploration and production using new technologies and advanced drilling and completion methods. The company invests in known, producing areas that it believes will yield prolific production. The company is aggressive in gaining interest in leases that will produce desirable returns. The company utilizes leading technologies and methods to maximize exploration and production results and ROI.  Intrepid Drilling is dedicated to investor enrichment through its aggressive yet conservative investment strategies. Revenue proceeds resulting from operations are distributed amongst working interest partners on a timely basis.  The Company is judged by investors based on performance, not words. With this in mind, kindly review the Company’s Operations Strategy. The Operations Strategy is designed to build the company while maximizing investor value and return on investment (ROI).

Philosophy

There is an old adage in the oil industry and it is: “If you want to find oil, go where it is being found.” Intrepid’s philosophy is to explore areas where prolific amounts of oil and/or gas are being found. Many companies prefer to explore in old fields trying to find bypassed hydrocarbons. Although that method has worked for many companies, that is not the methodology used by Intrepid. Intrepid believes there is no replacement for producing oil and gas from reservoirs where the wells start with virgin pressures.  Major oil companies such as Texaco, Shell, and others, stopped drilling onshore within the lower 48 States around 1985. That has opened the door for many independent exploration companies to drill in most areas of the United States without competition from the majors. Additionally, companies like Exxon, when they are active within the lower 48 States, are looking for huge reserves and they leave prospects that are less than 10 million barrels for smaller independents to exploit.  We have found that drilling these prospects is quite profitable and will yield larger returns on investment more quickly. In today’s economy, the investment you make with Intrepid is one of the most efficient ways to make your profits grow.

Operations Strategy

Intrepid Drilling believes that the most economical way to produce an oil well is to produce the well at a conservative rate, which results in a low decline in production, and a high recovery rate of the oil or gas in the reservoir. This can be done by producing the reservoir at its Critical Rate, which is the rate at which the reservoir formation will naturally flow oil into the well-bore without pulling in the Bottom Water (the saltwater underlying the oil in a formation). A study by the Petroleum Engineering Department of Louisiana State University to calculate Critical Rates for certain reservoirs is used by Intrepid Drilling, along with other research to reduce premature water coning.  Primarily, when fields are first discovered they are produced at greater rates than the reservoirs’ Critical Rate, so as to recover as much oil as rapidly as possible. Rates of production generally range from 300 to 1,000 barrels of total fluid per day. In water drive reservoirs, the Bottom Water eventually begins to cone upward bypassing the oil column and decreasing the percentage of oil produced. The saltwater is able to do this because of its lower viscosity (the resistance to flow) in relation to the oil. Even though high production rates result in an initial flush of oil, over the life of the field it is a harmful practice. Severe coning leads to a decrease in the percentage of oil produced, increasing quantities of saltwater, corrosion problems, mechanical failures, higher operating costs, higher saltwater disposal costs, premature abandonment of wells, and an overall poor recovery of the oil in the reservoir.  In the oil industry, it is not unusual for a well that started out producing 100% oil to decline to 1% oil and 99% water over its life, even though a significant percentage of oil remains in the reservoir. The cost to produce a well that makes 10 barrels of oil and 1,000 barrels of water per day are significant and often uneconomical and is the reason thousands of wells are abandoned every year.  Depending on the reservoir, Intrepid’s goal is to produce newly drilled and completed wells at conservative rates based on the characteristics of the individual formation. These rates may allow the wells to flow, which will reduce operating costs. Rates higher than this will bring in salt water and result in a poor performance of the well’s overall recovery. With a good completion, wells are expected to produce many years with a very slow decline in oil or gas production. Advantages to this operation strategy are:

• Increase in total oil or gas recovered from the reservoir
• Greatly extended life of a property
• Decrease in saltwater production
• Decrease in operating expenses
• Significant increase in property profitability