Reservoir Descriptions

Monteagle Limestone - Mississippian age, consisting of 200-250 feet of massive limestone with shale beds. It contains chert and has fossil-fragmental and oolitic porous zones. Porosity is vulgar and normally occurs in 5 to 30 feet near the middle of the formation. It is a consistent oil and gas producing formation. The average barrels of recoverable reserves is in the 20,000 barrels per well range. Most petroleum engineers assign 60 MMCF gas to Monteagle wells. This is based on volumetric calculations. However, many Monteagle gas wells have produced five times this amount of gas due to natural fracturing. Other Monteagle gas wells in the area are still producing commercial quantities of gas after 30 years.

St. Louis Limestone - A Mississippian age limestone formation, usually about 80 feet thick. Will produce oil when porous zones are present, but this is seldom seen in this area.

Fort Payne Limestone - This Mississippian age formation consists of massive limestone with considerable chert. It is also fossiliferous, especially in crinoids fragments. The thickness is 10 to 150 feet. It is a very prolific producer of oil with a small amount of associated gas cap. The formation produces little or no water in associations with the hydrocarbons. The porous zones are called reefs and range in thickness from 5 to 30 feet. They appear to be developed in a northeast-southwest direction along terrace or minor anticlinal folds.
The generally accepted standard for primary recoverable reserves from a Fort Payne well is 50,000 to 60,000 barrels, although some wells have produced more than 200,000 barrels and are still producing.

In fields where KTO will be drilling, there are wells that have produced oil and/or gas for nearly thirty years and are still commercial wells. Several came in flowing at a rate of 1,200 barrels of oil a day and sustained 100 barrels or more for than a year before production stabilized and gradually began to decline. Several wells produced more than 200,000 barrels of oil but 30,000 to 60,000 barrels during a well's lifetime is closer to the norm.

Chattanooga Shale - This Devonian age formation is usually 30 to 60 feet thick and lies just below the Fort Payne. The Chattanooga shale is jet black with minor gray shales and small amounts of pyrite. It is quite radioactive and has a distinct signature on the Gamma Ray geophysical logs.

To the north in Kentucky, this shale thickens to several thousand feet and is the source of the majority of gas production in eastern Kentucky. It is characterized by relative low flow rates with large recoverable reserves over a long period of time. Shale wells have been reported to have produced for more than 100 years.

On the Plateau, while a few Chattanooga Shale wells do produce gas naturally, it is only recently becoming a drilling target in that area. The relatively thin Chattanooga shale section in Tennessee was not considered an economically viable producing formation.
New stimulation techniques and high natural gas prices have combined to make the Chattanooga Shale an attractive drilling target. Production rates of from 30 to 70 mcf of natural gas have been achieved through this type of stimulation.

In addition to new wells that will be drilled into the shale, KTO has more than 100 shut in or producing gas wells in which the Chattanooga Shale can be stimulated.

Trenton, Sunnybrook, Stones River - These Middle Ordovician formations consist of thick-bedded limestone with minor interbedded shales. The combined thickness can be up to 1,500 feet. Some porous zones appear to consist of fractures with secondary crystallation. Often there are numerous sections of porosity 10 to 20 feet thick.

These Ordovician formations are the major source of oil off the Plateau to the west, where wells of up to 1,700 barrels of oil a day have been discovered at depths of less than 2,000 feet.

These wells then settle down to sustained production of 100 BOD for a year or more before dropping off to a few barrels a day. On the Plateau, for the most part, these formations have not been tested, as the primary target has been the Monteagle and Fort Payne formations. Recent increases in oil prices has sparked interest in considering drilling deeper to test these formations.

Knox - This lower Ordovician formation is a massive, dolomitic limestone, which has seldom been completely penetrated. The thickness is in excess of 2,000 feet. The top of the Knox is a regional unconformity with the porosity and permeability related to surface leachings. There is no know oil or gas production from Knox wells in this area of interest. However, as the Knox produces from shallower depths to the West and deeper depths to the East makes it a possibility for future exploration in this area.

The faulting in this area, mentioned earlier, faulting likely increases in magnitude with depth, which should increase the possibility of greater structural closure on the deeper formations. The major deeper zones, which are virtually untested in this area, are the Rose Run (Middle Knox) at about 5,000 feet; the Copper Ridge at about 6,400 feet and the Roane Sand at 8,200 feet. The basement complex is expected at 8,500 to 10,000 feet.

Summary

While interest increases in deeper drilling to test the Ordovician age formations, the Mississippian age reservoirs (Monteagle and Fort Payne) offer the greatest opportunity for success. The high hit ratio in the blanket Monteagle formation and the more elusive but prolific Fort Payne formation provides significant oil and gas development opportunities with known reserves and the infrastructure in place to produce the hydrocarbons.

In addition, drilling each Monteagle and Fort Payne well deep enough to expose the entire Chattanooga Shale section significantly increases the potential for additional natural gas production in an economically successful well.