Sharon Lee Bartlett, F.K.A. Heitzman - Page 13

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          irrespective of whether they are produced by natural reservoir              
          mechanisms or by waterflooding.                                             
               To obtain a waterflood, injection wells are drilled on an              
          approximately 1:1 ratio with producing wells.  This would mean up           
          to 30 (25 if only 25 producing wells were drilled--as the                   
          Memorandum called for) additional wells.  Neither the Coburn                
          report nor the economic projections in the Stonehurst memorandum            
          accounted for the costs of drilling any such additional wells.              
          There was also no proposal for a water flood injection well                 
          pattern.                                                                    
               The Coburn report also asserted that operating expenses for            
          a notional well would be $250 per month, which was too low in               
          1979 to include water flood operating costs required to support             
          the water injection required to obtain 518,400 barrels of                   
          production over 15 years.  Even the $290 per well per month                 
          projected in the economic projections, which were then inflated             
          at 10 percent per year over 15 years, was too low for operating a           
          water flood.                                                                
               Even with the problems described supra, the projected                  
          reserve of 518,400 barrels, based upon 30 notional wells, is less           
          than the 757,500 barrels assumed by the economic projection A               
          described supra.  The turnkey contract also only called for                 
          drilling 25 wells in 1980, while the two economic projections               
          both assumed that a total of 55 wells would be drilled, of which            
          49 would be producers.                                                      



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