Company Goals and Objectives
    The Company’s key goals are to become a major CO2 supplier and a major CO2-EOR producer in the Permian Basin of New Mexico.

The Company is currently executing a drilling program at St Johns that when completed will enable the Company to confirm the optimum size of development of the field by improving our understanding of the deliverability of each well over an extended area.

The results from this drilling program is expected to prove up approximately 2 to 3 trillion cubic feet of CO2 reserves that would underpin a project capable, once developed, of initially delivering approximately 350 million cubic feet per day of CO2 gas into the Permian Basin. With the knowledge gained from this drilling program it is expected that the Company would be in a position to pursue long term gas supply agreements with existing EOR producers and new entities looking for a stable long term gas supply.

Further, the Company intends to continue to pursue the acquisition of its own oil fields where considerable CO2-EOR potential remains. The targeted fields are mid-sized legacy assets with long lived production histories which, to date, have not been the focus of larger companies. The Company has recently acquired two oil fields that total approximately 56 million barrels of EOR. In the case where highgraded fields are not for sale the Company believes, that, by owning the CO2 source field, we will be in a very strong position to leverage ourselves into opportunities by providing the CO2 to the target field.

The growth plan for the Company over the next five years includes the following:
  1. Develop and control the dominant position in the St Johns Helium and CO2 source field.
  2. Own and control the dominant position in the pipeline system into Artesia, New Mexico.
  3. Acquire mature oil producing properties where limited primary production remains and where significant plugging liability exists for the current owner(s).
  4. Acquire properties where significant value can be created through a combination of exploitation, development, exploration and marketing, including secondary and tertiary operations.
  5. Acquire properties that provides for a majority working interest and operational control.
  6. Maximize the value of the properties by increasing production and reserves while reducing cost; and
  7. Expand the pipeline system to new focal areas with identified growth potential.
  
   

 ST. JOHNS TO ARTESIA PIPELINE

  
    In early 2006, the Company commissioned Babcock Eagleton Engineers of Houston, Texas to conduct a pipeline screening study for a CO2 pipeline route from St. Johns, Arizona to Hobbs, New Mexico and through a proposed Artesia hub.

The details of the pipeline to Artesia hub are:
  1. 20 inch pipeline.
  2. Pipeline route avoids all national parks, Indian lands and military bases.
  3. Total length from St Johns to Artesia Hub is 330 miles.
  4. 500 mm cubic feet per day (max).
  5. Total cost $330mm to $360mm.
  6. Total time to permit and construct 21 to 24 months.

At this stage in the Company’s development, and due to the capital requirements to build the pipeline, it is proposed that the Company form a strategic partnership with one of the major pipeline operators in the country to build the main pipeline from St. Johns or to sell that right to a third party group, most likely as a Master Limited Partnership (MLP). Under this scenario the Company will pay a tariff to the MLP pipeline owner that provides for an acceptable rate of return and the Company will have the rights to a predetermined minimum daily throughput. By selling the pipeline rights to an MLP, the Company will be able to offset the large capital costs to build the pipeline and pay a tariff that would apply as an operating cost. To date, the Company has had discussions with several groups who have expressed a strong interest in owning the pipeline. This project suits an MLP very well as their cost of capital is extremely low compared to ours and their acceptable rate of return is generally less than 15%. The MLP structure offers tremendous tax benefits and this project would be a valuable annuity for them for 20 to 30 years.

The Company intends to create it’s own niche area initially in the western edge of the Permian Basin. This area offers tremendous growth potential through CO2 -EOR injection and currently has limited if any CO2 supply. Furthermore, this area is the closest to the St Johns source field and can provide an excellent hub from which to expand. Further, the Company will allocate a certain percentage of CO2 production to third party sources and will use this cash flow to fund the acquisition of mature oil fields where significant CO2-EOR potential exists. There is currently no competition for this type of activity in this area and the Company’s large volumes of CO2 will drive the play.

Eor Inc.’s initial target area has the potential for CO2-EOR reserve additions of greater than 600 mm barrels of oil. There is currently no CO2 supply available to this area.


By balancing a combination of 3rd party gas sales, our Helium sales under our take-or-pay contract with Air Liquide and the acquisition of highgraded mature and/or depleted oil fields in the Permian Basin Eor Inc. has the potential to increase our market cap from $100 million to approximately $1.6 Billion and beyond.

  
   

 PERMIAN BASIN POTENTIAL

  
  The potential for CO2-EOR in the Permian basin is shown in Table 1, however, a proprietary study conducted for the Company has highgraded several oil fields within the New Mexico portion of the Permian basin where considerable stranded oil remains. The targeted oil fields are estimated to contain approximately 1.2 billion barrels of additional recoverable reserves that can be produced by the injection of CO2. The volumes of CO2 required to capture this resource is estimated at approximately 4 trillion cubic feet and is in line with estimates of recoverable CO2 reserves at St Johns.

At a peak daily rate of 500mm cubic feet of CO2 supply the Company has tremendous leverage with the field owners in determining which fields will be flooded first. The Company’s CO2 is a strategic asset that can be used to optimize deal terms and timing of development.

By owning the CO2 resource and controlling the pipeline infrastructure the Company can become the key player in New Mexico and opens the door to reserves growth of several hundreds of million barrels of EOR oil.


 
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