Technical Progress Report: September 30, 2003 To September 29, 2004

Use of Cutting-Edge Horizontal and
Underbalanced Drilling Technologies and

Subsurface Seismic Techniques to Explore,
Drill and Produce Reservoired Oil and Gas from
the Fractured Monterey Below 10,000 ft in the
Santa Maria Basin of California
Technical Progress Report
September 30, 2003 to September 29, 2004
by
George Witter (Temblor Petroleum Company)

Robert Knoll (Maurer Technology Inc.)
William Rehm (Maurer Technology Inc.)
Thomas Williams (Maurer Technology Inc.)
February 2005
DE-FC26-03NT15426
Temblor Petroleum Company, LLC

2000 Oak Street, Suite 200
Bakersfield, California 93301
Maurer Technology Inc.

13135 South Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Disclaimer
This report was prepared as an account of work sponsored by an agency of the United States
Government. Neither the United States Government nor any agency thereof, nor any of their
employees, makes any warranty, express or implied, or assumes any legal liability or
responsibility for the accuracy, completeness, or usefulness of any information, apparatus,
product, or process disclosed, or represents that its use would not infringe privately owned
rights. Reference herein to any specific commercial product, process, or service by trade name,
trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement,
recommendation, or favoring by the United States Government or any agency thereof. The
views and opinions of authors expressed herein do not necessarily state or reflect those of the
United States Government or any agency thereof.
DE-FC26-03NT15426 - ii - Temblor Petroleum Comp.

Annual Report (9/30/03 – 9/29/04) Maurer Technology Inc.
Abstract
This project was undertaken to demonstrate that oil and gas can be drilled and produced safely
and economically from a fractured Monterey reservoir in the Santa Maria Basin of California by
employing horizontal wellbores and underbalanced drilling technologies. Two vertical wells
were previously drilled in this area by Temblor Petroleum with heavy mud and conventional
completions; neither was commercially productive. A new well was drilled by the project team in
2004 with the objective of accessing an extended length of oil-bearing, high-resistivity Monterey
shale via a horizontal wellbore, while implementing managed-pressure drilling (MPD)
techniques to avoid formation damage.
Initial project meetings were conducted in October 2003. The team confirmed that the
demonstration well would be completed open-hole to minimize productivity impairment.
Following an overview of the geologic setting and local field experience, critical aspects of the
application were identified.
At the pre-spud meeting in January 2004, the final well design was confirmed and the well
programming/service company requirements assigned. Various design elements were reduced
in scope due to significant budgetary constraints. Major alterations to the original plan included:
1) a VSP seismic survey was delayed to a later phase; 2) a new (larger) surface hole would be
drilled rather than re-enter an existing well; 3) a 7-in. liner would be placed into the top of the
Monterey target as quickly as possible to avoid problems with hole stability; 4) evaluation
activities were reduced in scope; 5) geosteering observations for fracture access would be
deduced from penetration rate, cuttings description and hydrocarbon in-flow; and 6) rather than
use nitrogen, a novel air-injection MPD system was to be implemented.
Drilling operations, delayed from the original schedule by capital constraints and lack of rig
availability, were conducted from September 12 to November 11, 2004. The vertical and upper
curved sections were drilled and lined through the problematic shale member without major
stability problems. The top of the targeted Monterey was thought to be seen at the expected
TVD of 10,000 ft where the 7-in. liner was set at a 60° hole angle. Significant oil and gas shows
suggested the fractured interval anticipated at the heel location had been penetrated.
A total of 2572 ft of 6⅛-in. near-horizontal interval was placed in the shale section, extending
planned well length by approximately 470 ft. Very little hydrocarbon in-flow was observed from
fractures along the productive interval. This may be a result of the well trajectory falling
underneath the Monterey fractured zone. Hydrocarbon observations, cuttings analysis and
gamma-ray response indicated additional fractured intervals were accessed along the last ±900
ft of well length. The well was completed with a 2⅞-in. tubing string set in a production packer
in preparation for flow and swab tests to be conducted later by a service rig.
The planned well time was estimated as 39 days and overall cost as $2.4 million. The actual
results are 66 days at a total cost of $3.4 million. Well productivity responses during
subsequent flow and swabbing tests were negative. The well failed to inflow and only minor
amounts (a few barrels) of light oil were recovered. The lack of production may suggest that
actual sustainable reservoir pressure is far less than anticipated.
Temblor is currently investigating the costs and operational viability of re-entering the well and
conducting an FMI (fracture detection) log and/or an acid stimulation. No final decision or
detailed plans have been made regarding these potential interventions at this time.
DE-FC26-03NT15426 - iii - Temblor Petroleum Comp.

Table of Contents
Disclaimer....................................................................................................................................ii
Abstract ......................................................................................................................................iii
List of Figures .............................................................................................................................v
1. Introduction ........................................................................................................................1
1.1 Background .................................................................................................................1
1.2 Objectives of Demonstration Well ...............................................................................3
1.3 Project Team ...............................................................................................................5
2. Executive Summary ...........................................................................................................6
3. Experimental.....................................................................................................................10
3.1 Task Statement .........................................................................................................10
Task 1 – Technical Meeting ......................................................................................10
Task 2 – Redrill and Complete the Primary Project Well ..........................................10
Task 3 – Produce and Test Primary Project Well......................................................11
Task 4 – Conduct and Analyze VSP Survey .............................................................11
Task 5 – Drill, Test and Produce Additional Horizontal Wells from Same Location ..11
3.2 Drilling Objectives......................................................................................................12
3.3 Shale Stabilization.....................................................................................................13
3.4 MPD Operations........................................................................................................13
4. Results and Discussion...................................................................................................16
4.1 Summary of Progress by Task ..................................................................................16
Task 1 – Technical Meeting ......................................................................................16
Task 2 – Redrill and Complete the Primary Project Well ..........................................16
4.2 Shale Stabilization and Disposal ...............................................................................17
4.3 MPD Methods and Techniques .................................................................................17
4.4 Productivity Results...................................................................................................19
4.5 Field Execution..........................................................................................................20
5. Conclusions......................................................................................................................22
6. References........................................................................................................................23
Appendix A: Notes from Project Team Meetings in Bakersfield
Appendix B: Drilling Program for Castillo, Ross and Howe 2-19
Appendix C: Daily Drilling Diary and Operational Comments
Appendix D: Synopsis of Petroleum Indicators in the Monterey Formation
DE-FC26-03NT15426 - iv - Temblor Petroleum Comp.

List of Figures
Figure 1. Location of Project Well in Los Alamos Prospect ......................................................2
Figure 2. Outcrop of Fractures Near Well Location...................................................................2
Figure 3. Surface and Bottomhole Location of Original Well ....................................................3
Figure 4. Application Objective .................................................................................................4
Figure 5. Plan (blue) and Actual (red) Well Paths.....................................................................8
Figure 6. Plan and Actual Time/Depth Curves..........................................................................9
Figure 7. Liner and Slave String Design .................................................................................13
Figure 8. Slave-String Fluid Paths ..........................................................................................14
Figure 9. Flare System............................................................................................................15
Figure 10. Impact of Pressure on ROP .....................................................................................18
DE-FC26-03NT15426 -v- Temblor Petroleum Comp.

1. Introduction
1.1 Background
This project was undertaken to demonstrate that oil and gas can be explored, drilled and
produced safely and economically from a fractured Monterey reservoir in the Santa Maria Basin
of California by employing cutting-edge horizontal and underbalanced drilling methods, and
subsurface seismic exploratory techniques. Two wells were previously drilled vertically in this
area by Temblor Petroleum Company LLC with heavy mud and completed conventionally by
running and cementing casing, perforating and acidizing. Neither well was commercially
productive even though very strong shows of oil and gas were obtained while drilling, and free
oil and gas were recovered from both wells during and after completion, with no indication of
water. Seismic and well data indicate a structural trap of some 1500 acres and an oil column of
at least 700 ft, providing a potential accumulation of 30 to 50 million barrels of 31 gravity oil, and
30 to 50 BCF of gas.
To demonstrate the implementation of cutting-edge drilling techniques in this setting, a new well
(the Castillo, Ross and Howe 2-19) was drilled by Temblor on the location: SEC 19 T8N R32W,
Santa Barbara County, California, in the fall of 2004 (Figure 1). The project’s objective was to
access a minimum of 2100 ft of oil-bearing, high-resistivity Monterey shale with a horizontal
wellbore. The Monterey Formation is a fractured/micro-fractured Miocene reservoir that has
produced most of the oil and gas in the Santa Maria Basin onshore region of south central
California. The target reservoir is at a depth exceeding 10,000 ft true vertical depth (TVD). All
historical and commercial onshore production from the high-resistivity section of the Monterey
has come from fields at much shallower depths – 5000 ft TVD or less.
An initial discovery well was drilled by Oxy in 1986. The target was defined by seismic as a
down-thrown fault block or graben. This vertical well penetrated and logged approximately 700
ft of a light oil column (31°API) at 10,500 ft TVD in the high-resistivity Monterey. Although a flow
test delivered an initial rate of 48 BOPD, flow declined within hours. The well would not sustain
commercial production and was abandoned. Temblor drilled a second delineation well in 1999.
This well was drilled from a new surface location approximately 0.5 mile southeast of the
discovery well surface location.
This second well was directionally drilled (30° inclination) so that its bottom-hole location was
only 400 ft laterally displaced from the discovery well within the Monterey target interval. The
second well also logged approximately 700 ft of light oil column with no evidence of bottom
water or top gas. Although the well flowed for a short period (10 BOPD for 1.5 hours), it would
not sustain commercial flow rates after an acid stimulation treatment, and was suspended.
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Figure 1. Location of Project Well in Los Alamos Prospect
Both original wells were vertical to sub-vertical, and it appears only the first “discovery” well was
near to (or accessed) a set of natural vertical fractures. Fractures are clearly seen in nearby
outcrops (Figure 2) and are expected to trend NE–SW within the Monterey due to the local
stress state.
Figure 2. Outcrop of Fractures near Drilling Location

The target is in a seismically mapped structure covering some 1500 acres (Figure 3). The
target is estimated to contain between 36 to 54 million barrels of light oil reserves with 36 to 54
BCF of gas. Successful exploitation of this structure by horizontally accessing vertical fractures
in a non-damaging mode is expected to deliver production of ±600 BOPD, and would promote
significant interest in similar deep Monterey structures thought to be prevalent in the area.
Figure 3. Surface and Bottomhole Location of Original Well
General geology, drilled cuttings analysis, logs and pressure test data from both original
Temblor wells suggested the existence of oil-filled vertical fractures within the shale. Pressure
build-up and flow test results conducted on the delineation well suggested a dual-porosity
system, with extremely tight matrix permeability in the shale. The degree of micro-fracturing in
the shale matrix is thought to be a key unknown. All pressure build-up interpretations were
qualitative at best due to the very tight nature of the shale matrix (less than 0.01 millidarcy), the
unknown proximity to fractures/micro-fractures, and the potential for skin damage. Based on
test interpretations and observed suspended well shut-in surface pressures, reservoir pressure
was expected to be in the range of 4600–5200 psi.
High mud weights were required to hold back a massive (±4000 ft thick) and problematic
“Sisquoc” shale member above the Monterey in both original wells. Extensive stability problems
in this interval had led to many costs overruns in both previous wells, and were seen as a major
well construction challenge in the demonstration well. High mud weights were also seen as
very unattractive in any productive interval due to productivity damage (skin) concerns.
1.2 Objectives of Demonstration Well
To mitigate the concerns highlighted in the two earlier wells, the proposed demonstration well
would be drilled using novel managed-pressure drilling (MPD) methods, including the use of a
drilling deployment valve (DDV) to allow normal tripping operations while maintaining the

bottom-hole pressure target of approximately 4400–4600 psi. The basic objective of this new
effort was to implement advanced MPD techniques to acquire economic production rates from a
fractured Monterey reservoir by accessing multiple fracture sets in a non-damaging mode. The
application objective is shown in Figure 4.
Figure 4. Application Objective
The original concept evaluated was to reenter the suspended delineation well to drill the high-
resistivity Monterey in a near-horizontal attitude. However, wellbore stability and well profile
concerns in the curved section and MPD equipment requirements made this option unviable.
To give the well the best operational setting, a new well was planned from the delineation well’s
surface location. This allowed:
1. A spatial arrangement whereby the heel of the new well could access a potential
fractured interval (identified by seismic interpretation) directly below the surface location.
The remainder of the 2100 ft of near-horizontal interval (80° angle) would follow a down-
structure direction (azimuth 300°). Seismic interpretation and well control suggested a
structural drop of approximately 300 ft from the demonstration well’s heel target to the
toe target. The toe of the well would terminate within close proximity (±100 ft laterally
displaced) from the discovery well’s bottom-hole location.
2. The use of the existing location to construct a new, straight and larger main vertical
section through the majority of the problematic shale member. This new intermediate

section and upper curve could be drilled with high mud weights and cased with 7-in. liner
into the mid-section of the Monterey at an 80° angle.
3. A new high-pressure-rated 10¾/7-in. surface liner design allowing for placement of a

down-hole deployment valve at the top of the liner in a retrievable 7-in. slave string.
4. The slave string allowed simple air injection (air-lift) at 3200 ft TVD. This novel approach
provided capability for MPD without the requirement of special motors/MWD/LWD
equipment or practices necessary when conducting MPD with conventional aerated
fluids. The use of air also provided significant cost savings versus nitrogen.
1.3 Project Team
A multi-disciplined project team was assembled comprising several consultants, consulting

groups or companies, each experts in their own field, in a coordinated effort to achieve the
project objectives. Total project coordination and supervision is being provided by Temblor.
Imke Consulting provides basic well planning, well-site rig supervision, contracting and
coordination for well-site services including rig selection. lmke was primarily responsible for the
plug back and early drilling phases of the program, running casing. and final completion.
Maurer Technology is primarily responsible for coordination and planning of the horizontal and
underbalanced drilling phases of the project. Weatherford International, Inc. provided
underbalanced drilling expertise, equipment and personnel. Scientific Drilling provided state-of-
the-art directional drilling technology, equipment and personnel for all phases of the primary
project well. Paulsson Geophysical Services was to be enlisted to provide technology and
equipment for the vertical seismic profile (VSP) survey.

2. Executive Summary
The basic objective of this effort was to implement advanced managed-pressure drilling (MPD)
techniques to acquire economic production rates from a fractured Monterey reservoir by
accessing multiple fracture sets in a non-damaging mode. The first project meetings were held
in Bakersfield in October 2003. Basic objectives of the project were confirmed. The
demonstration well would be completed open-hole to minimize productivity impairment of the
fractured target zone, and provide the most intervention options in the future should the well not
respond as expected. Following an overview of the geologic setting and local field experience,
three critical aspects of the application were identified:
1. Problematic Sisquoc shale and related hole problems must be mitigated in the main
vertical and upper curve section.
2. Significant geologic and structure uncertainty exists. Optimum placement of the lower
curve/heel of the well into the high-resistivity Monterey target was seen as critical to
success. This would require definition and application of “drilling observation” geo-
steering contingencies in landing the well at the heel target and maintaining the planned
productive interval placement within the Monterey interval.
3. The static reservoir pressure was not well defined, with a large range of observations
from 3200 to 5200 psi. This unknown presented many design complications and had to
be better defined before the optimum MPD well construction methodology and related
well attributes were finalized.
Once these critical elements were examined, all other aspects of the well design were reviewed.
A review of tasks and pursuits for team members is provided in Appendix A.
The well’s pre-spud meeting was conducted in Bakersfield, CA, in January 2004. The final well
design was confirmed and the well programming/service company requirements assigned. A
copy of the basic well program is presented in Appendix B. Many design elements were
reduced in scope due to significant capital budget constraints. The major alterations are
summarized as follows:
1. Conducting a new VSP seismic survey was delayed to a later project phase since the
viability of the technology was seriously questioned. Nearby field tests of the technology
had been disappointing as reported from Thums field experience.
2. Rather than re-enter the existing delineation well, the surface location would be twinned
with a new, larger surface hole. Although this added capital expense, it was deemed
necessary for many operational concerns.
3. Priority was placed on placing the 7-in. liner into the top of the high-resistivity Monterey
target as quickly as possible to mitigate concerns regarding hole stability, as evidenced
in the two previous wells. An inhibited water-based system rather than an oil-based mud
(OBM) was deemed acceptable given the larger than normal hole size design. This
design provided extra clearance for the 7-in. liner in the 9⅝-in. intermediate section. The
water-based fluid choice would also allow for more precise hydrocarbon observation of
entering the top of the high-resistivity Monterey heal target in the upper curved interval.

4. Due to costs constraints, all evaluation activities were curtailed to a minimum, including
the option for evaluation logging and/or coring in the horizontal interval.
5. The main geosteering observations of fracture access in the lower curve and productive
interval would be deduced from penetration rate, cuttings description and hydrocarbon
in-flow observations. This approach is termed “evaluation-while-drilling” (EWD). A
bottom-hole pressure sensor would be employed on the MWD/LWD package in the
productive interval to confirm that the balanced to under-balanced state was being
effectively generated by air injection.
6. Rather than employ an expensive nitrified drilling fluid in a conventional UBD mode, a
novel air injection concentric slave string MPD system was designed as discussed
previously. The solids-free water-based drill-in fluid had special additions to stabilize the
shale, reduce corrosion concerns and ease disposal. Successful application of this
system is detailed in this report.
Continued capital constraints and lack of rig availability significantly delayed the start of drilling
operations. A special component for the 7-in. slave string (a check-valve sub) was never made
available from the service supplier, which further complicated the surface casing design, and
delayed the development of MPD operational procedures. Drilling operations commenced on
September 12, 2004 and were terminated on November 11, 2004. The vertical and upper
curved sections were drilled and lined through the problematic shale member without major
stability problems. The top of the high-resistivity Monterey was thought to be seen at the
expected TVD of 10,000 ft where the 7-in. liner was set at a 60° hole angle. Significant
observations of oil and gas suggested the fractured interval anticipated at the heel location had
been penetrated.
Post-well mud-log analysis could be interpreted to suggest that the top of the high-resistivity
Monterey was not seen at this point. Instead, a fault or fracture up into the upper Monterey had
been crossed. The high gas show was thought at the time to be proof of high-resistivity section
of the Monterey, as this gas show is never seen in the upper Monterey in the area. However,
this interpretation of penetrating the high-resistivity Monterey at this depth was increasingly
challenged as drilling progressed since cuttings recovered from below the 7-in. shoe lacked the
dolostone and chert expected, and the drilling rate was faster then expected with a PDC bit.
(See the geologist’s post-well summary report in Appendix D.)
The original design envisaged lining the upper curve at an 80° angle into the mid section of the
high-resistivity Monterey shale interval at near 10,150 TVD. The curve was terminated and
lined at a higher TVD and lower angle (60°) to allow open-hole production contribution from the
observed fractured interval at the heel of the well. Build capability and penetration rates were
poor in the upper curve. The smaller bit to be used below the 7-in. liner was expected to allow
faster construction of the lower curve to the designed 80° productive interval angle.
A total of 2572 ft of 6⅛-in. open near-horizontal interval was placed in the shale section, passing
the original well’s bottom-hole location and extending the planned well length by approximately
470 ft along the intended trajectory. The 6⅛-in. lower curve was not built as originally planned
below the 7-in. liner shoe. Instead, a ±250 ft tangent section was drilled at a 62° angle to further
penetrate into the high-resistivity Monterey mid section. This was followed by the planned lower
curve drilled up to an 80° angle and gradually increased to near 90° at final TD. Very little
hydrocarbon in-flow was observed of fracture crossing along the mid-length of the productive
interval. This may be a result of the well trajectory falling underneath the Monterey highly

fractured zone along the mid-length portion. Alternatively, the wellbore may have been above
the high-resistivity Monterey due to a down-thrown structural feature possibly seen at the heel of
the well.
Hydrocarbon observations, cuttings analysis and gamma-ray response indicated additional

fractured intervals were accessed along the last ±900 ft of well length at the toe. The well was
completed with a 2⅞-in. tubing string set in a production packer at 9250 ft in preparation for flow
and swab tests to be conducted later by a service rig. Planned and actual horizontal well paths
are compared in Figure 5.
Figure 5. Plan (blue) and Actual (red) Well Paths
The planned well time was estimated at 39 days and overall cost as $2.4 million. Actual results
are 66 days (Figure 6) at a total cost of $3.4 million.

DAYS
0 5 10 15 20 25 30 35 40 45 50 55 60 65
0
2,000
4,000
6,000
DEPTH (ft)
8,000
10,000
Actual MD
Plan MD
12,000
14,000
Figure 6. Plan and Actual Time/Depth Curves
Productivity responses during subsequent flow and swabbing tests were negative. The well
failed to inflow and only minor amounts (a few barrels) of light oil was recovered when swabbing
the well down to a depth of 8500 ft TVD. (This would have lowered the bottom hole pressure
(BHP) to less than 1500 psi.) The lack of production seen at this low BHP may suggest that the
actual sustainable reservoir pressure is far less than anticipated. The operator is currently
investigating the costs and operational viability to re-enter the well and conduct an FMI (fracture
detection) logging run and/or an acid stimulation. No final decision or detailed plans have been
made regarding this potential intervention at this time.

3. Experimental
3.1 Task Statement
This project includes planning, drilling, testing, and producing one or more wells in the Los
Alamos Prospect in the Santa Maria Basin of California using innovative managed-pressure
drilling (MPD) techniques. Specific tasks (as originally proposed) are summarized below.
Task 1 – Technical Meeting
The first phase (Budget Period 1) of the work will be to perfect the details of the drilling,
completion and cost plan of the project through a meeting with the primary sub-contractors for
the project. These sub-contractors are Maurer Technology, Sugar Land, Texas; Weatherford
International, Inc., Houston, Texas; Scientific Drilling, Bakersfield, California; and lmke
Consulting, Bakersfield, California. Maurer Technology will provide overall coordination and
expertise as to the underbalanced and horizontal phases of the project. They will provide
consultants and well-site supervision for these technologies during this phase of the project.
Weatherford International will provide cutting-edge underbalanced drilling technology,
equipment and personnel during the horizontal phase of the project. Scientific Drilling is one of
the foremost providers and developers of directional drilling equipment and expertise worldwide,
and will provide these services, equipment and personnel during all phases of the drilling
operation. lmke Consulting will provide the overall well planning, well services and overall well-
site supervision. They will be responsible for coordinating the phases of drilling and completion.
Task 2 – Redrill and Complete the Primary Project Well
Subject to adjustments, updates and modifications resulting from the technical meeting
discussed under Task 1 of the project, a drilling and completion plan involving five subtasks is
expected:
Task 2.1 – Plug Back the Well to be Redrilled
The existing Temblor well which is cased to 11,400 ft needs to be plugged back to the base of
9⅝-in. surface casing at 3520 ft, and a kick-off plug set. This work will be accomplished with a
workover rig prior to moving the drilling rig on location.
Task 2.2 – Drill into the Top of the Monterey Formation and Log
An 8¾-in. hole will be directionally drilled with some 9° of westerly deviation to approximately
9000 ft. This portion of the hole will be drilled through the Sisquoc formation with oil-based mud
to prevent clay swelling and associated problems with the Sisquoc. It is planned to use a top-
drive rig, if available, for all phases of the drilling operation to save drilling time and give "up-
hole” rotation ability, if needed. It is planned to use PDC bits through the Sisquoc. At this point
the well will be drilled directionally in a northwesterly direction until an 80° deviation is reached
in the high-resistivity portion of the Monterey. This portion of the hole will also be drilled with oil-
base mud, PDC bits in the Sisquoc, and hard formation insert bits in the Monterey.
DE-FC26-03NT15426 - 10 - Temblor Petroleum Comp.

Task 2.3 – Run and Cement 7-in. Casing in the Monterey
It is planned to run a string of 23, 26 and 29# casing to TD and cement to 3000 ft above the
shoe. A Weatherford downhole deployment valve tool will be set in the casing string at
approximately 3000 ft depth.
Task 2.4 – Drill Horizontally and Underbalanced 1000 ft in a Northwesterly

Direction
A 6⅛-in. hole will be drilled northwesterly 1000 ft with an 80° deviation to the approximate
bottom-hole location of the existing Oxy well. This portion of the hole will be drilled
underbalanced using crude oil or a similar lightweight drilling fluid. If oil or gas enters the bore
hole, it will be allowed to flow freely to the surface and separated through a rotating control head
(RCH). Gas will be flared and oil sent to temporary storage tanks. It is planned to use a
Weatherford actively energized RPM-3000 rotating control head and a four-phase UBD
separation system in this phase of the operation. Hard formation insert bits will be used in the
Monterey. After drilling out the shoe of the 7-in. casing and before commencing the
underbalanced operation, a full-diameter core will be cut for 15 ft to 30 ft to facilitate analysis of
the fractured reservoir. After reaming the cored hole, a drill-stem test will be conducted with
packer set in the base of the 7-in. casing to determine to the degree possible the true reservoir
pressure. This will allow selection of the best design, equipment and drilling fluid for the
horizontal phase of the operation. Trips for bit changes or other reasons will be made without
killing the well by use of the downhole deployment valve (DDV).
Task 2.5 – Install Wellhead and Tubing for Production as Open Hole Completion
Again, the wellhead and tubing will be installed without killing the well using the downhole
deployment valve.
Task 3 – Produce and Test Primary Project Well
The well will be produced and tested at various rates and choke sizes to determine productive
capacity and duration. The rates tested will depend on a combination of factors, including the
behavior of the well while drilling underbalanced. In general, it will be produced at lower rates
initially, regardless of its indicated productive capacity. Only oil will be marketed since there is
no gas pipeline presently available. The oil will be trucked to market in Santa Maria, Ventura or
Bakersfield. Produced gas will be flared, for which there are permits.
End of Budget Period l / Decision Point.
Task 4 – Conduct and Analyze VSP Survey
A vertical seismic profile (VSP) survey will be conducted and analyzed after the first month of
production on the primary well and will be incorporated in the selection of the next wells to be
drilled.
Task 5 – Drill, Test and Produce Additional Horizontal Wells from Same Location
If production testing on the first well proves successful, and an economic discovery is indicated,
a second horizontal well will be drilled. The location of the second well would probably be

immediately east of the first and nearly vertically under the well site. Results of the Sonic LWD
tool and the VSP survey would also be incorporated in this decision. If the rate of penetration
was sufficient in the first well and other complications were not encountered, the second well
might be drilled horizontally for 1500 or 2000 ft. The second well would be production tested for
a similar amount of time as the first well, and then a third well drilled. If the third well were
successful, then it would probably be planned to drill several more wells continuously at
locations best suited to help define the field. It is possible that some of the wells would be of
greater length and that perhaps 10 to 12 horizontal wells would be the optimum number to
efficiently produce the reservoir. During the development phase of the project, reservoir studies
would be continuously performed and evaluated to help make this determination.
3.2 Drilling Objectives
The Temblor Deep Fractured Monterey project’s primary objectives were divided into three
categories:
1. Verify the extent of fracturing/micro-fracturing in the subject block of the deep Monterey
shale. This goal has been met but with disappointing production results.
2. Drill the subject zone at (or near) a horizontal attitude in an underbalanced condition with
due regard to HS&E concerns. This goal was met, proving the viability of horizontal
wellbores and MPD techniques for the deep high-resistivity Monterey shale member.
3. Complete the well and measure potential production relative to estimated volumes of oil
in place. This goal was met but the observed lack of reservoir deliverability is
disappointing. Possible well intervention/stimulation options are currently under review.
Other issues pursued by the project included:
¾ Maintaining the stability of the problematic Sisquoc shale member above the high-
resistivity Monterey target
¾ Ability to conduct MPD drilling in this setting, and the ability to conduct “evaluate-while-
drilling” into and within the Monterey target
¾ Successful application of PDC bits in the shale sections
¾ Improvement seen in penetration rate delivered by MPD drilling methods
¾ Economically and environmentally acceptable disposal of the drilling fluid and cuttings
with an inhibited water-based drill-in fluid that can mitigate shale stability concerns
Each of these topics is discussed below and in Section 4.

3.3 Shale Stabilization
The high-angle productive open-hole section of the well was successfully drilled with water
containing a KCl substitute (i.e., tri-ethylene methyl chloride) to:
1. Stabilize the shale
2. Allow visual inspection of cuttings for micro-fractures, and gas or oil in the micro-
fractures
3. Limit disposal problems associated with drilling fluids and cuttings containing 4% salts
4. Control corrosion on the drill pipe and casing
3.4 MPD Operations
Managed-pressure drilling (MPD) operations on the well were accomplished by pumping air
through a concentric casing string (slave string) set at about 3300 ft TVD (Figure 7).
RIH Stabbed in
Well Head
7” Scab Liner
DDV DDV
Control Line
Seal Assembly
Injection Sub
10¾” Casing
7” Liner
Figure 7. Liner and Slave String Design

Air Injection
7” Slave – 3½” DP Annulus
10¾” – 7” Annulus
Injection Sub
Water-Based Mud
Wireline-Retrievable Float
6⅛” Open Hole
Figure 8. Slave-String Fluid Paths
This system was employed to:
1. Allow the use of air instead of nitrogen by eliminating the problem of corrosion in the hot
Monterey section
2. Allow the use of conventional MWD and LWD mud pulse tools by keeping the air out of
the drill pipe
3. Increase drilling rate as the differential pressure between the wellbore and formation
decreased and became negative
4. Allow EWD observations of hydrocarbons while drilling
Several techniques were combined to enhance safety at the drill rig when drilling in a balanced
to underbalanced state including:
¾ A down-hole deployment valve (DDV) was installed in the 7-in. slave string near 3000 ft.
When the drill bit was pulled up above the valve, it could be closed to isolate the top of
the hole from any down-hole pressures. This would allow the last 3000 ft of drill pipe to
safely be pulled from the hole on trips without killing the well.
¾ A closed separator system was employed to contain oil and gas fumes from the drilling
fluid before they were sent to the flare.
¾ A shielded flare (Figure 9) was employed to avoid the visual impact of a bright flare next
to a major highway and three burner heads were used to avoid supersonic rumble from
the flare.

Figure 9. Flare System
Drill bits in the deep Monterey in the previous wells had generally been limited to insert-type
tricone bits because of dolomite/silicate streaks, although some evidence from nearby work-
over operations indicated that PDC bits may be worth pursuing in this application.
The hole was completed open hole to simplify the completion and allow future capability to
further investigate open fractures as indicated by offset well data and drilling observations.

4. Results and Discussion
4.1 Summary of Progress by Task
Task 1 – Technical Meeting
Several meetings were held with project team members to plan the well and field operations.
Minutes of planning meetings are provided in Appendix A.
Task 2 – Redrill and Complete the Primary Project Well
The project was modified because the re-entry was deemed to be much less attractive than
drilling a new hole (as discussed previously).
Task 2.1 (Modified) – Drill Oversized Surface Hole, Set and Cement Casing
The surface hole was successfully drilled and cased without significant incident. A complete
discussion of all drilling operations and results for all well sections from surface hole to final TD
is provided in Appendix C.
Task 2.2 (Modified) – Drill 9⅞-in. Intermediate Hole and Upper Curve into Top of
Monterey Formation
The upper curve was drilled and lined with 7-in. liner without major hole-stability problems. The
top of the high-resistivity Monterey target was clearly seen by drilling observations at the
expected TVD of 10,000 ft. Drilling rates were poor with rock bits, but improved with PDC bits.
Significant rig time was lost due to rig problems, and failure of the primary cement job on the 7-
in. liner. The liner was successfully cemented via a remedial squeeze operation. An adequate
cement top was confirmed behind the liner by a temperature survey. The 7-in. liner was set
higher then planned at a 60° angle just into (50 ft) the high-resistivity Monterey target. This was
done to allow production from an observed fracture set at the Monterey top; to allow for a
smaller bit size in the lower curve to generate faster drilling and build rates up to the planned
80° horizontal angle; and to permit lining of the exposed intermediate section before shale
stability became a problem.
Task 2.3 (Modified) – Drill Productive Interval 10,258 ft to 12,789 ft
A total of 1061 ft of 6⅛-in. open-hole tangent and lower curve were drilled in three days using
the MPD slave string air-lift method described. The main horizontal section was then drilled
from 11,319 to 12,789 ft passing the original discovery well’s bottom hole location at the
planned TVD. Numerous trips were made for failed motor/MWD components and rig repairs.
Good oil and gas shows were seen over the last 900 ft of open hole, and fracture crossings
were suggested by MWD gamma-ray response. A PDC bit run was very successful but a
second run failed, likely caused by MWD junk in the well. Subsequent rock bit runs delivered
comparatively poor drilling rates and footage results.

Hole stability was good throughout, and MPD operations were successful in lowering BHP to the
targeted range, confirmed by a BHP MWD pressure sensor. Reduced BHP also correlated with
improved drilling rates.
4.2 Shale Stabilization and Disposal
A basic challenge for wells in this area is stabilization of the deep Monterey Shale to protect the
integrity of the hole and to allow cuttings to return to the surface in good condition for evaluation
while drilling. This implies an inspection of drilled cuttings for micro-fracturing and oil within the
fractures, and is calibrated with mud-gas logs, changes in drilling, etc. The target high-resistivity
section of the Monterey is a gradation between chert, argillaceous chert and siliceous shale and
should not require stabilization. The bounding upper and lower Monterey units are less
siliceous and thus shale stabilization may be attractive in theses intervals.
Typically, shale is stabilized by adding 4% KCl to the drilling fluid. Unfortunately, a

concentration of 4% KCl also represents the point of maximum corrosion of the tubulars. This
much salt also requires special drilling waste disposal procedures.
Problems with KCl were successfully resolved on the demonstration well by using a KCl
substitute – TEA (triethanolamine) – at a concentration of 0.1% by volume in the drill-in fluid.
The material has a residual chloride ion content of only 165 ppm as opposed to 2000 ppm with
KCl. And unlike KCl, TEA does not require extensive use of corrosion inhibitors.
TEA was first reported for use for shale stabilization in Saudi Arabia. In the last three years it
has been used experimentally by ENCANA Oil Company in the Denver Julesburg Basin. TEA
kept the hole in good condition in the productive/horizontal interval. There was no trouble with
shale stabilization, and cuttings, while very small, did not appear to be significantly hydrated or
altered. The geologist’s ability to observe mineralogy associated with fractures, and
hydrocarbon staining were not affected by this drill-in fluid design.
There were significant cost savings by minimal use of corrosion inhibitors accompanied by no
apparent corrosion of the drill pipe. Drill cuttings and spilled mud were disposed of by the Soli-
Ban technique. This system uses proprietary material to solidify the cuttings and slop mud
using an exothermic process that, when set, has minimal leaching. This allowed the well
cuttings to be piled into a hill, seeded and left on location instead of being hauled to a disposal
site. Drilling fluid waste from the well was primarily water with no salt.
4.3 MPD Methods and Techniques
The well was to be drilled with pressures maintained via managed-pressure drilling (MPD)
techniques in a balanced to underbalanced condition to avoid major damage to the reservoir
from drill solids plugging and water blocking, to optimize EWD, and to increase drilling rate.
Bottom-hole pressures were maintained as planned. EWD observations appeared adequate in
detecting oil-laden fracture crossings.
Drilling rates in previous wells (which employed relatively heavy muds) were very slow. Both
theory and practice indicated that a significant increase in drilling rate would be expected as the

wellbore pressure was reduced to equal or below formation pressure. This was clearly
demonstrated in this demonstration well (Figure 10). Since formation pressure was never firmly
established, it is difficult to assign a calculated value to the drilling rate vs. differential pressure
equation. In general, however, the improvement in drilling rate appeared to follow the trend of
the “d” exponent of Jordan and Shirley.
Gamma Ray ROP Pump Pressure Annular Pressure
Figure 10. Impact of Pressure on ROP
There are a number of MPD techniques that could have been used to maintain the balanced to
underbalanced pressures. The concentric annulus method was chosen because it allows the
use of mud-pulse MWD; minimizes corrosion in the deep, hot hole; minimizes the effect of
injected gas on the formation and cuttings; and eliminates the need to use expensive nitrogen
as the gas phase. The larger hole required for this system also allowed the retrievable
placement of the DDV and related control lines.
Air was injected into this concentric annulus. The air unloaded about half of the treated water in
the annulus between the drill pipe and 7-in. slave string, which reduced bottom-hole pressure
about 460 psi (665-psi loss in hydrostatic pressure plus a 200-psi gain in friction pressure).
After the original UBD service provider supervisor was replaced, and air rates and back-
pressure maintained as originally planned, the MPD operation was smoothly implemented.
MPD operations were successful in maintaining the targeted bottom-hole pressure while drilling.
This performance was evidenced by surface and bottom-hole pressure observations, as well as
oil and gas out-flows. However, no major hydrocarbon in-flow was observed at any time during
drilling, and a lack of reservoir pressure resulted in no need to employ the DDV during trips.

4.4 Productivity Results
The lack of well productivity to date is discouraging. The apparent conclusion is that the
reservoir does not contain significant open fractures, and/or the lack of micro-fractures in the
matrix cannot provide pressure support to recharge the fractures at an economical rate. This
appears to be true in the original vertical wells and may have been repeated in this near-
horizontal application. This conclusion is supported by the well’s behavior during all MPD
operations.
Evaluation while drilling (EWD) of this application appeared to be very successful and useful.
Once cuttings recovery procedures were adjusted for MPD operations, the geologists indicated
that the samples were relatively clean and easy to interpret, although finer then seen in vertical
well applications. As MPD operations were stabilized, mud-gas logging improved, with very
good samples seen from the toe of the well. The originally interpreted top of the high-resistivity
Monterey target was easily observed by gas/oil shows, cuttings description and penetration rate
variation. As discussed, whether this was actually the top of the high-resistivity section of the
Monterey or a hydrocarbon-filled fault zone, remains a subject of debate. Observations of oil-
filled fractures were likewise relatively straightforward in the productive interval.
The fact that the mid-length of the well may be slightly below the highly fractured Monterey
interval does not solely explain the lack of productivity seen to date. The high-resistivity
Monterey was expected to be relatively thick (300–500 ft). If the vertical extent of natural
fractures is confined to a significantly thinner target interval, then the oil storage and
deliverability potential of the reservoir are likewise significantly reduced. If that is the case,
having 600–900 ft of additional productive length would not likely have salvaged the well’s
productivity. The best scenario to prove otherwise may be to re-enter higher up in the well to
drill a vertical pilot and attempt to confirm the exact level and extent of the high-resistivity
Monterey, then re-enter the open heel of the well and drill a second length of productive interval
higher in the target formation.
Capital cost constraints experienced during well planning led to a decision to perform no
evaluation logging on the well other than the EWD conducted. In retrospect, a suite of wireline
logs or cores may have been of value in confirming the location of the well and actual reservoir
characteristics. These data may have also helped define the viability and optimum design of
any future stimulation or damage removal options for the existing well. However, the team is
relatively confident in the general accuracy of the EWD conducted. It is concluded that this level
of evaluation was adequate for the base objectives of the well. It is also believed that the
interpretation stemming from that effort is sufficiently reliable to support the team’s explanation
for lack of well productivity.
Other possible explanations for the lack of well productivity include:
¾ There are no significant naturally fractured or highly micro-fractured intervals accessed

by the horizontal section (although many drilling observations indicated that oil-filled
fractures were crossed).
¾ The reservoir was significantly damaged during drilling operations (although a non-
damaging, solids-free, water-base fluid was employed in a MPD mode). An emulsion
block from the water/oil mixture is suggested as a possible damage mechanism.

¾ The well collapsed at the open-hole heel, blocking production (although drilling
observations indicate a stable and gun-barrel hole in a very tight and competent shale
member). During subsequent swabbing tests a sinker bar was run on a slick line to a
measured depth of 10,239 ft at a 60° angle. This is about 23 ft below the bottom of the
7-in. liner shoe in open hole.
4.5 Field Execution
The final well design proved to be effective in meeting project objectives; all basic technical
goals were accomplished. However, well productivity was disappointing and well costs were
significantly above the original estimate. After analyzing the overall operation, the project team
believes that the most significant improvements that could be applied to this application in the
future are related to field execution of the project plan. Although nothing can be (or could have
been) done to mitigate geologic risks, better field execution of the plan may have resulted in
less apparently unproductive hole section in the middle of the horizontal interval, and perhaps
more cost-efficient operational performance in the field.
A significant factor that reduced the efficiency of field operations was a large time delay (six
months) between the pre-spud meeting and commencement of field operations. Detailed
discussions and plans were developed for all novel aspects of the application during the well
planning stage. However, the time delay resulted in key well-site supervision and service
provider personnel involved in the planning not being available for field operations. A reliance
on key service providers to provide site supervision and programmed procedures was only
weakly fulfilled. Various key MPD equipment components suggested by the service provider
were unavailable once field operations commenced. These circumstances led to a gap
between the well plan and field execution. Key personnel who were not active in both the pre-
spud meetings and field operations included the drilling contractor site supervisor, the operator’s
well-site supervisor, and the UBD well-site supervisor.
Drilling time sheets maintained by the crew indicate that total problem time experienced on the
well officially accounted for only 3.8% of total field operations. However, the definition of
problem time used here is very subjective. From the project team’s perspective, there was a
larger proportion of time lost due to avoidable errors and less than optimal operational decisions
made on site. Delays were primarily due to a combination of:
1. Slower than anticipated penetration rates in both the intermediate and productive hole
sections. The merit of PDC bits appeared attractive in this application. This was made
evident by the superior performance of this bit type in both the intermediate and
productive sections. Application of PDC bits was not seen as attractive by the operator’s
site-supervisor. The decision to running the last PDC bit (#8) after observing possible
MWD junk in the hole (Allen screw) may have led to premature failure of this last PDC
bit. PDC bit runs in the intermediate section are apparently very worthwhile. The
degree of improvement seen with PDC’s in the horizontal section is more difficult to
evaluate due to the possible variation in rock types drilled by PDC’s as compared to rock
bits.
2. Slower than expected rig operations with numerous equipment failures, and extended
liner and tie-back operations stemming from a failed primary cementing job and a space-
out error in placement of the slave string. The drilling contractor places significant focus

on HS&E operational policies. This focus is admirable with respect to safety concerns.
From some team members’ perspective, however, rig operations appeared to be
conducted very slowly. Even with a relatively slow and methodical pace of rig activity,
many avoidable operational failures occurred. The drilling contractor’s HS&E policy
would not permit tripping out of the productive interval without first filling the hole with the
water-based dill-in fluid. This policy appeared to negate the potential use and benefit of
the DDV. Given the observed lack of reservoir pressure exposed throughout the
productive interval, this point was moot from a field operations perspective, and thus the
issue was neither stressed nor pursued.
3. Numerous trips for failed motor and MWD assemblies in the productive interval. The
expected bottom-hole temperatures of 250–260°F were discussed with the service
provider with respect to motor requirements during the pre-spud meeting. Unfortunately,
there did not appear to be an adequate supply of appropriately designed and serviced
motors, resulting in a high frequency of motor/MWD failures on the well.

5. Conclusions
Based on an analysis of field operations and results for the demonstration well to employ
managed-pressure drilling (MPD) techniques to drill and produce oil and gas from the fractured
Monterey in the Santa Maria Basin of California, the project team developed the following
conclusions and recommendations:
1. MPD applications incorporating horizontal wellbores are viable in these deeper high-
resistivity Monterey targets. The existence of conductive fractures/micro-fractures and
sustainable dual-porosity reservoir pressures are most likely prerequisites for success.
2. TEA drilling fluids were applied successfully here and should be applied in similar
Sisquoc and Monterey shale applications. This additive mitigated corrosion, provided
adequate shale inhibition, provided good cuttings, and eased cuttings disposal efforts.
OBM is not a unique requirement for stable hole sections in these Miocene sequences.
This well had the Sisquoc top exposed to open-hole operations for a period exceeding
16 days, with no major stability problems observed.
3. The proprietary Soli-Ban technique of waste disposal merits further application in this
general setting.
4. Novel MPD drilling modes should be given expanded application in this general setting.
This drilling method provided good capability for evaluation while drilling, faster
penetration, and minimal concern for formation damage.
5. Application and customization of PDC bits should be more aggressively pursued in deep
Monterey drilling projects.
6. It is critical to ensure the continuity of key staff members between planning and field
operations phases. Properly briefed and adequately relieved field supervision (with 24-
hour coverage) is a necessity when conducting novel well-construction operations. Field
supervisors must strive to ensure that an open and effective “team” effort exists,
particularly when novel operations are employed.
The lack of oil/gas production observed even though bottom-hole pressure was reduced via
swabbing to less than 1500 psi, may suggest that the actual sustainable reservoir pressure is
far less than anticipated. Temblor is currently investigating costs and operational viability to re-
enter the well and conduct an FMI (Formation Micro-imager for fracture detection) logging run
and/or an acid stimulation. No final decision or detailed plans have been made regarding this
potential intervention at this time.

6. References
(No references cited herein.)

Appendix A
Temblor-Los Alamos DOE Demonstration Project
Meeting Notes (1)
Bakersfield, CA − October 8, 2003
Executive Summary
The first technical and preliminary well design meeting on this project was held at Temblor
offices in Bakersfield on October 8, 2003. In attendance were:
¾ George Witter, Temblor Petroleum, Primary Operator and Project Manager.
¾ Harold Imke, Imke Consulting, Operations Engineer responsible for service selection
and contracting, and all field operations contracting and supervision.
¾ Bob Knoll, Maurer Technology, Well Design Team Leader, also responsible for field
operations monitoring, all project documentation and report generation for management
edit/approval, technology transfer presentation generation and delivery assistance as
required.
¾ Dennis Wood/Jim Stanley, Weatherford, underbalanced drilling (UBD) service provider.
Objectives of the one-day meeting were to:
1. Define/confirm primary and secondary project objectives
2. Introduce the overall geologic and operational setting and historic well
construction/production experience to date
3. Outline key project risks and related technical pursuits to mitigate same
4. Define key project team members and responsibilities of each during the various tasks of
the project
5. Generate a go-forward action plan with specified tasks and milestones goals/dates
The basic objective of the project was confirmed – proving economic exploitation of the Los
Alamos, High Resistive Monterey (HRM) formation by optimum fracture access with a horizontal
well constructed with UBD. The well would be completed open-hole to minimize productivity
impairment of the highly fractured target zone. Following an overview of the geologic setting
and field experience, three critical aspects of the application were identified as follows:
¾ Problematic shale and related hole problems must be mitigated in the main tangent and
curve section.
¾ Significant geologic (structure) uncertainty exists in this application. Optimum placement
of the lower curve/heel of the well into the Monterey target at ±10,000 ft TVD will require
definition and application of geo-steering contingencies in landing the well.
DE-FC26-03NT15426 1 of 13 Temblor Petroleum Comp.

Appendix A Maurer Technology Inc.
¾ Static reservoir pressure is not well defined, with a large range of observations from
3200–6000 psi. This unknown presents many design complications and must be better
defined before the optimum UBD well construction methodology and related well
attributes are finalized.
Once these critical elements were examined, all other aspects of the well design were reviewed.
A series of technical pursuits was defined and related tasks assigned to the members of the
team. It is intended that a detailed well design meeting with all team members and key service
suppliers will be conducted near year’s end once all theses technical pursuit tasks are
completed. The following will offer a discussion of all aspects, a listing of 12 sub-tasks identified
up to the point of re-entering the existing well and assigned responsibilities, and a task
completion time line. The team anticipates drilling the well in mid-spring of 2004 once optimum
weather conditions are prevalent in the area, pending completion of the detailed well design and
the availability of specific equipment.
This document is the first of a series of progress reports for the DOE. The second will be
submitted upon completion of the tasks outlined in this report.
Technical Issue Discussions

Lease
It is anticipated the current lease will be adequate for the first demonstration well. Topography
in the area is difficult and it is hoped that minimal to nil earth moving will be required. The area
topography will pose a problem (potential source positions) for any intended “Walk-Away VSP”
survey (see VSP topic below). Both Weatherford and Imke will review/confirm with the selected
rig contractor the lease layout with respect to optimum spotting of the proposed “Triple/Top-
Drive” drilling unit and UBD surface equipment package.
Additional on-site accommodation and a command unit will be included in the layout so that 24-
hour personnel coverage is maintained on site during critical well construction activity. The final
lease layout will be confirmed in the final well design and consideration will be given to
optimizing lease layout so that minimum alterations will be required to have all future
development wells drilled from this “pad” location.
Existing Well
This well is shut in against open perforations in the target interval. A fluid level test is intended
to better define the static reservoir pressure. The fact that the well has been shut in for many
months provides the potential to obtain a more reliable measurement of reservoir pressure,
which is critical for optimum UBD operations design. The suspended well must be plugged
back to inside the 9⅝-in. casing at around 3400' KB for preparation of side-track. (Note: all
depths will be defined as below Rotary Table/Kelly Bushing – KB.) Imke will provide confirmed
rig-specific KB measurements with inclusion of rig-floor height extension for an RBOP
installation above the standard BOPs (if required). Imke will ensure that all depths quoted in the
well program are referenced to this rig-specific KB.
The plug-back operations will be conducted with a service rig weeks prior to mobilizing the
drilling rig to give best chance for a good kick-off cement plug set. The plug will be balanced
spotted through tubing and extra caution will be exercise to minimize plug distortion during
removal of the tubing string. A pressure test will be conducted on the 9⅝-in. surface casing to

ensure integrity and confirm pressure rating in the optional design of installing but not tying-back
the 7-in. liner hung in the surface pipe.
Kick-off and Curve Section
Once rigged-in, tested, etc., the drilling rig will polish the cement plug down to design KOP (kick-
off point) at around 3750' KB. The original planned trajectory included a “drop” to about 9° of
deviation (the original well had about 20° of angle at this depth), holding that angle along a main
tangent section down to a second KOP around 9500' KB. At this point a lower curve would be
built at a rate of 4º/100' to a final angle of around 80-85º landing the well heel in the lower
portion of the Monterey, and setting 7-in. liner at that point. A 1000' horizontal section would
then be drilled holding 85º to cut up through the Monterey from bottom to top along the well path
from heel to toe.
This original well path plan has been adjusted as follows. The original planned employed a very
conservative 4º build rate for the lower curve, that may have generated considerable angled
hole exposure in the problematic Sisquoc shale. To minimize shale exposure, the main 9º
tangent section may be drilled deeper and a more aggressive lower curve build rate (8-10°/100')
will be considered to turn the well to landing angle. This would reduce shale exposure and may
reduce rig time in the lower curve. Knoll will work with the directional supplier and Witter to
investigate potential well trajectory options, torque and drag impacts and related BHA
configurations for both curve and horizontal sections. Employment of drilling jars in the curve
will also be investigated. Any future well paths would include geometry to optimize secondary
leg kick-off sites and drainage line locations for option of multilateral well application.
The original plan of landing the curve in the lower portion of the Monterey target has been
adjusted. The current design being considered would terminate the lower curve upon proof of
top entry into the Monterey at around a 75º angle. The 7-in. liner would be cemented in place at
this point, the shoe drilled out and pressure measured to confirm static pressure of the Monterey
target. A short conventional core run will also be considered at this point.
This design alteration provides numerous benefits:
1. The total exposure time in the curve will be minimized to help avoid shale instability
problems.
2. Monterey interval pressure testing can confirm reservoir pressure to optimize UBD
operations in the horizontal section. The use and placement of a downhole deployment
valve (DDV) could be finalized after the pressure test, based on optimized UBD
operations requirements. This may mean running the DDV on a 7-in. tie-back from the
liner hanger into the surface wellhead. All these operations would take place in a “cased
hole” environment to minimize exposure time/risk in the shale sections.
3. Landing the curve in the upper Monterey will allow for more productive interval along the
horizontal section, better geo-steering options (more TVD to adjust horizontal well path)
and provide a relatively simple operational setting for pressure test, possible coring
operations, etc.
4. Having a core recovered from the Monterey will allow for more definitive reservoir
characterization, and possible investigation of drill-in fluid damage mitigation, clean-up
and stimulation fluid design if necessary. Finally, having a core in the heel, and

conventional wire-line logs from the original vertical penetration adjacent the planned toe
location, gives relatively good reservoir description coverage. This along with the
potential use of a gamma ray in the horizontal section BHA reduces or eliminates the
need for evaluation logging runs along the horizontal section.
The curve section drilling BHA will be defined to ensure planned curve rates are well within tool
capability, and that the 7-in. liner can be installed comfortably with adequate over-pull margins.
Employment of drilling jars and a reaming-while-drilling (RWD) assembly will be evaluated as
additional steps to ensure successful shale section conditions for running the liner. Knoll will
work with Imke and the selected directional driller/rig contractor and fluids provider for all
bit/BHA design in both curved and horizontal sections, torque and drag analysis, hydraulics
programming, liner running and cementing, liner hanger design and installation operations, etc.
Drilling Fluids
The original plan included using a mineral oil in the curve to mitigate swelling shale. Although
this approach may still be employed, it is relatively expensive, may not mitigate all shale time-
dependent instability, and possesses the risk of massive loss of oil if an undefined fracture is
penetrated in the lower curve upon entering the Monterey formation.
The basic approach to mitigate shale instability risk will focus on minimizing exposure time in
the shale section. This means no logging, testing, coring or special tool installation while the
shale section is exposed. Alternate water-based fluids will be reviewed by Knoll, Imke,
/Weatherford to identify any lower cost options. (Note: any technical pursuits which generate
alterations in the well plan will be accompanied with a cost estimate and comparison. The final
well plan will include a detailed AFE to define all expected well construction costs.)
As the curve section is non-productive and will be cased, no special non-damaging attributes or
processing of this drilling fluid is required. The well path is not complicated, so torque and drag
should be well within operational limits of all tubulars, rig hoisting capacity, etc. The cheapest,
most stable and easily disposed of fluid that allows fast, problem-free drilling of the curve is
required.
Horizontal Section and UBD Operations
The adjusted plan calls for drilling out the 7-in. shoe overbalanced with conventional fluid to cut
a core and to conduct some form of reservoir pressure measurement. Upon completion of
theses tasks, the UBD plan will be finalized. Weatherford will provide three separate proposals
designed for low, medium and high pressure. These may include placement of a DDV in a tie-
back string from the 7-in. liner hanger/PBR (polished bore receptacle) to the wellhead, a
modified wellhead for DDV control lines, and a stage port for using the 7-in. tieback as a “slave”
string for annular gas injection.
This approach (annular gas lift) provides many benefits versus pipe injection of gas in UBD
operations in this setting since the drill-in fluid could be a “non-compressive” fluid. This in turn
allows for employment of conventional motors and MWD guidance and gamma ray in the
horizontal section. It also minimizes pressure surges during connections and poses a safety
benefit since the drill-pipe side is always full of fluid. Knoll will work with Imke and Weatherford
to document a detailed program for all the UBD downhole equipment installations, UBD
operations, ERP, etc.

The basic intent will be to drill the horizontal section in a constant balanced/UBD condition. The
actual UBD fluid design and operating practices required depend on drilling observations in the
lower curve and reservoir pressures encountered. If a water-based system is viable, it would be
given first choice since it would allow much more definitive geo-steering alternatives in the
horizontal section, perhaps including gas analysis, cuttings florescence, more definitive
monitoring of vented hydrocarbon volumes while drilling, etc. Extra solids-removal equipment
may be employed during the horizontal section to help remove drilled fines pending fluids
selection.
If gas is required, then some consideration will be placed on gas type. Air may be viable
pending corrosion concerns; membrane nitrogen offers benefits but adds cost. Natural gas is
not viable as there is no readily available source. These issues will be outlined and the
optimum combination defined in the three-pressure-case UBD proposals.
The horizontal section well path is not dramatically altered from the original plan. The coring
would generate a short tangent to be reamed out (only 10-15' of core hole is anticipated). Then
±1000' of 6¼-in. open-hole horizontal section would be UBD drilled. The path would be
continued at a 75-80º angle to stay within the Monterey target zone along an azimuth direction
thought to cross natural fractures optimally. We may consider including a gentle azimuth bend
in the latter length of the horizontal section if fracture penetration is not seen to be optimum
based on drilling observations.
Geosteering in the lower curve and horizontal section will include observations of ROP, cuttings
description, possibly gas analysis, UBD flow from the well and gamma-ray MWD in the
horizontal section. No gamma-ray is foreseen for the curve since the entry into the Monterey
should be quite visible from these other observations, and the Monterey is very thick in TVD and
thus appears to present a relatively easy geo-steering target to land the 7-in. shoe.
Actual horizontal hole length drilled will depend on hole conditions experienced and in-flow
observations of hydrocarbon. It is planned to use heavily gauge-protected rock bits in this
section since experience with PDC’s in this application has been disappointing to date. In future
development well drilling, PDC’s would be an obvious consideration (core data would help in
this pursuit). But for this single demonstration well, there is no room for trial-and-error bit runs,
thus site-specific selected insert bits are most likely. The bits would be pulled based on time of
circulation on the motor and penetration rates. Each bit trip would be treated as a go/no-go
decision point in respect to terminating TD at some length short of 1000’.
VSP and Seismic While Drilling Pursuit
An internal investigation conducted by Temblor has indicated that this particular operational
option should be re-evaluated for employment on this first demonstration well. The local surface
topography is not conducive for surface sensor placement, any special tools run on the main
hole drilling assembly adds too much operational risk in the curve, the technology has not been
adequately “field-proven” for application in this deep demonstration well, and there is doubt
given to the value and interpretation reliability of this technology in this particular
geologic/structural setting. The team believes that this particular sub-task/objective should be
delayed at this point, but be considered in future development wells should that opportunity
arises, and the technology be more field-proven at that time.

Production and Stimulating Options
The team’s intent is to design and construct the well as a very basic application of an horizontal
well crossing multiple vertical fractures in a dual-porosity reservoir rock system. As such, the
key strategy is to cross maximum fracture sets, and to avoid damaging the exposed fracture
faces with drilling fluid, cuttings, cement, etc. Thus, a UBD well completed open-hole.
However, this is a test well and there are many unknowns regarding structure/stratigraphy,
reservoir pressure and characterization, fracture conditions, likely damaging mechanisms, etc.
The intent is to place the well on production via a tubing string ASAP after terminating drilling
operations. Consideration will be given to completing the well in this manner with the drilling rig.
If a DDV is installed, it may allow for a production test with the drilling rig immediately upon
drilling termination. Following a successful test, the rig would be de-mobilized and the well put
on permanent production.
In the event of no, or poor flow from the production test, and pending all drilling observations, a
clean-up/stimulation may be considered. Again, the reservoir pressure and core recovery results
and analysis will be extremely valuable in this scenario. Knoll will work with Imke and Witter to
have a list of potential clean-up options for consideration should this scenario arises.
Detailed Project Tasks and Time Line

Lease Layout
Imke will generate a proposed lease layout schematic drawing including all UBD and well test
equipment, personnel trailers, etc. This layout to be presented and confirmed at the final well
design meeting including any additional costs related to earth moving, etc. Imke will also work
with Witter et al. to generate a geologic prognosis of the planned well including expected
markers, target top and bottom referenced to KB from the proposed drilling unit to be used.
Completion date target: December 5, 2003.
Vertical Well Plug-Back
Imke and Witter et al. will generate an operations program and cost estimate to measure static
reservoir pressure from the existing well; and to place a balanced cement plug to proposed KOP
in the 9⅝-in. casing. Additionally, a pressure test of the 9⅝-in. casing is required using a
service rig in the area. The reservoir pressure test should be conducted and interpreted by mid
November 2003. The well should be plugged back by the end of March 2004.
Basic Well Engineering
Knoll will work with Imke and all selected contractors to assemble a basic drilling program. This
will include well path and torque and drag analysis of all hole sections, any special BHA
components required (e.g., jars, RWD tools, etc.).
This also includes fluid hydraulics program for the curve, additional solids removal options for
the horizontal section, bit selections and drilling operating parameters for both sections. Draft
program of basic engineering to be completed by December 5, 2003.

Special Operations Programming
Knoll to work with Imke to develop special operations programming and tool selection for the
possibility of cutting a short core out of the 7-in. liner shoe and testing reservoir pressure at that
point. Special ops program to be drafted by December 5, 2003.
UBD Design and Equipment
Weatherford will generate three operational UBD proposals for the horizontal section based on
a low, mid and high observation of static pressure in the Monterey. These proposals will include
identification and placement/operational procedures for running any special components (the
DDV, slave string circulating port, modified wellhead, etc.); optimum fluid type, gas type,
operating ranges of fluid and gas injection, surface equipment fluid rate and pressure operating
ranges, AV requirements, and costs estimates for all three options. Knoll will work with Imke
and Weatherford to generate a proposal for production testing the horizontal section with the
UBD surface package and drilling rig. Basic UBD proposals and costs estimates are to be
completed by December 5, 2003.
Stimulation Options
Knoll will assemble an optional proposal for clean-up/stimulation steps to be considered in case
of poor inflow during production test. Proposal to be drafted after recovery of the core and
completion of the reservoir pressure tests.
Generate Draft Final Well Program
Knoll will gather all components from the various team members to construct a draft Final Well
Program. This document will be circulated by December 5, 2003 in preparation of a final well
design team meeting.
Final Well Design Team Meeting
A team meeting including all key service providers will be conducted in Temblor offices.
Targeted date is December 15, 2004. All aspects of the final design will be confirmed.
Equipment and personnel requirements will be defined, operational unison of various
components, and mobilization target dates confirmed.
Distribute Final Well Program & DOE Status Report
Based on all decisions and input from the team meeting, the program document will be finalized
and an interim progress report drafted for Management review and subsequently presented to
DOE. Status report draft to be completed by January 25, 2004.
Pre-spud Meeting, Safety Orientation
Once the drilling rig package mobilization is initiated, all rig personnel, key service providers and
team members will meet in a Los Alamos location to conduct a pre-spud safety orientation
meeting. All project goals and assumptions will be reviewed/confirmed, all operational steps
and contingencies outlined, operational authority and Emergency Response Plan (ERP) will be
detailed. Pre-spud meeting date is targeted near April 15, 2004 pending equipment availability
and weather conditions.

Temblor-Los Alamos DOE Demonstration Project
Meeting Notes (2)
Bakersfield, CA − January 21, 2004
Summary
A full team meeting held January 21, 2004 in Bakersfield was very successful in finalizing all
major aspects of well construction. All information is now assembled to begin documenting a
formal well construction program and AFE. MTI (Bob Knoll) and Temblor, Harold Imke, Imke,
will now document the AFE and plan to have the finalized version for distribution/approval by
mid February 2004. In February some critical consumables, (e.g.; casing, well-head, liner
hanger/DPV etc.) must be formally ordered by Temblor for a targeted spud date of early May
2004. Knoll is responsible to work with the directional drilling providers and Weatherford on a
final well trajectory plan, and then conduct analysis on T&D, hydraulics etc. All this to be
incorporated into the well program document targeted for draft distribution by late March 2004.
A pre-spud meeting would then be scheduled for immediately prior to field operations,
tentatively targeted the first week of May 2004.
Final Well Design Highlights

The major well design elements altered or finalized during the team meeting are summarized as
follows:
¾ Surface lease should be OK as is with little expansion required. The rig people will
probably be housed in nearby hotels/motels. Imke will confirm total number of
accommodation/support trailers on site, and will coordinate with rig provider,
Weatherford and all other services to generate a planned plot view of lease lay-out,
confirm water source etc.
¾ The new surface casing option will be pursued. Temblor to pursue/confirm all well
permitting issues. The new surface hole will use a more conventional grade 10.75-in.
casing since the 7-in. liner will be tied back upon completion as the primary production
casing string. The original well will be pumped in the interim, but production operations
would be suspended on this well during construction of the new well.
¾ The main hole (9⅝-in. bit to drill vertical and curve to 7-in. liner landing point at about an
80˚ angle and 10,000’ TVD) trajectory has been modified based on most likely
problematic shale exposure in the curved section. Both the team geologist and
geophysicist will review structure/lithology to update well prognosis with anticipated
critical hole sections and lithological tops. The new path option includes hitting a “heal
target” defined by seismic as a potential highly fractured sweet spot. The G&G team
members must consider this new target option – would it represent a hole trouble risk?,
and if so should the well path attempt to avoid it? Based on this review, Knoll will finalize
well trajectory with Imke and the directional suppliers, and finalize T&D, hydraulics
program etc. based on the final planned well path.

¾ The main hole will be drilled with performance motors, larger hole (9⅞-in.) and with
water based mud. The fluid system will be weighted and may include inhibiting
salts/additives. This section may incorporate a slight negative angle in the upper portion
below surface casing to allow optimal lower KOP and build rate in lower curve, and
lateral space to hit the new heal target option if this possible “sweet spot” does not pose
a hole trouble risk. Mud logging, cuttings analysis, and penetration rate will be the
primary geosteering indicators to observe entry into the high resistivity Monterey and to
pick 7-in. casing point.
¾ The coring option below the 7-in. liner shoe will be held as a contingency only, plans and
costs will be included in the program/AFE as a contingency. UBD plans have been
finalized and simplified. The 7-in. slave string will be tied back to the main wellhead via
a PBR assembly in the 7-in. hanger. This tied-back string will have a port sub below the
deployment valve (DPV) and above the PBR seal. This will provide a secured flow path
for air injection to gas lift the 7-in. slave string by drill string annulus.
¾ All out-flow in the UBD section will be diverted through a choke manifold into a large
atmospheric separator (gas buster); underflow from this vessel will be fed to either
dedicated oil skimming tanks and/or the rigs inflow system for solids removal and return
of base water to the rig pits. The mud loggers will coordinate through Knoll/Imke
regarding set up of sample catchers, gas probe location etc. Knoll/Imke will coordinate
with rig provider, fluids supplier, Weatherford and waste management provider to
generate a surface equipment lay-out, and fluids flow/handling plan/schematic, and BOP
stack-up drawing to fit under the rig floor.
¾ BHP will be monitored by an LWD pressure monitor on the BHA, no other LWD sensors
are planned for the productive interval. No other evaluation logging is planned for the
productive interval. Final TD will be called on site based on hydrocarbon inflow
observations, hole length, conditions and cuttings analysis. Fresh water will be the
preferred drill-in fluid, with additions of viscosifiers if hole cleaning dictates their use.
Once TD is called, this section will be sealed by packers, the DPV recovered and the 7
in. tied back to the wellhead as a standard production casing. The well would then be
completed with a tubing string tail pipe, packer, and pump setting nipple assembly.
Weatherford will submit a detailed completions plan and cost quote for Imke and Knoll to
finalize well program/AFE.

Team Meeting Notes (3)
Productive Interval Construction & Completion
Objectives, Well Design Modifications and
Operational Constraints Guidelines
Introduction
To date (November 12, 2004), 7-in. casing point at 10,245 MD, the vertical/upper curved portion
of the well has been constructed according to base plan. The high-resistivity Monterey appears
from all indications to have been encountered as predicted at a measured depth of 10,200’
(10,000’TVD). At ±10,228’ a very strong oil fracture crossing was indicated by oil/gas shows,
mineralogy and bit response. The base plan to drill the lower 9.825-in. curve to the lower-mid
Monterey landing target @ 80° inclination was modified and the 7-in. casing point called at this
current depth since:
1. Delays in the main hole section have led to open-hole exposure time approaching the
perceived maximum allowable time in problematic shales; the first priority in this section
is to successfully case off the shales into the Monterey. The team is highly confident the
high-resistivity Monterey has been reached, and thus feel it prudent to case the exposed
upper shales before they become a concern.
2. The immediate crossing of an oil fracture upon entering the Monterey is very
encouraging. The fracture will likely contribute to production if left uncased. The team
feels it’s best to set casing at the top of the Monterey, maintaining exposure to this
fracture in the 6.25’ open horizontal productive interval. The strong nature of the
siliceous rich Monterey suggests that very little hole stability risk is posed by leaving this
fracture uncased directly (e.g., 20-40’) below the 7-in. liner shoe, and this (open-hole
completion) setting is deemed safe for all the horizontal section productive interval within
the Monterey member.
3. Both milled tooth and insert bit runs in the upper Monterey shale resulted in
disappointing penetration rates; however, a PDC run in this section into the Monterey
delivered good penetration rate. The well-site management team, is encouraged by this
PDC performance to the point of intending a PDC run in the lower curve/horizontal
interval in the smaller hole size. It is felt that the remaining lower curve (e.g.; from 60° to
80° inclination) can be more effectively constructed in the smaller hole size in a MPD
mode versus the current larger hole size in an over-balanced mode.
This slight alteration in the base plan impacts the lower curve construction, and the early
penetration of a good oil fracture amplifies the hope that many more may be accessed in the
horizontal section. The most difficult aspect of the well has now been successfully drilled and
cased; but the most novel and dynamic operations are approaching. There are many unknowns
regarding the reservoir characteristics. This particular asset setting and the productive interval
MPD construction/completion intended methodology involves many novel aspects for all
concerned. Many of these issues and operational methodologies will be outside the standard
practice of the drilling crews, supervisors, etc. There is no standard program or line to follow.
Thus dynamic alterations to operational parameters will be required during all the MPD well

construction/completion. In preparation for this, it is necessary to have all field staff involved in
a pre-drill-out orientation/safety meeting to:
1. Confirm field operations chain-of-command. Reconfirm base well objectives and

establish operational constraints and limit guidelines for the remainder of the well
construction/completion activities.
2. Examine and address any operational aspects affected by the change in lower curve
design and setting 7-in. shoe at the top of the Monterey.
3. Walk through all the remaining procedures, equipment and service requirements from
installing DPV/MPD systems to placing the well on production with a service rig.
This memo hopes to provide the well-site management team with some background and draft
constraint guidelines to be reviewed/edited and approved by the team, then utilized at the pre-
drill-out well-site meeting for all crew members. Any and all additional points/comments
provided by any of the service providers, and approved by the well-site management team
should also be voiced and reviewed at this up-coming meeting.
Background Review
What is the High-Resistivity Monterey?
It is a very hard, highly siliceous and very finely bedded Miocene shale formation. It is the
source rock for all Monterey production in the area. There is very little data regarding reservoir
characterization, and there is no production data in this particular structure, which is very deeply
placed (3000–4000’ deeper) relative to all Monterey fields in the area. We do know that two
previous penetrations into this Monterey structure (both approximately 1200’ northwest of the
current well’s bottom hole location) encountered at least 500’ of oil column with no top gas or
bottom water. Neither well will produce at an economic rate, even after extensive
stimulation/clean-up attempts. The rock is very tight (0.001 mD), and the proximity of the
previous wells to natural fractures is unknown, but indications suggest that vertical fractures
exist, and the matrix may also have micro-fractures. Seismic anomalies may indicate more
highly fractured material in close proximity to the previous two wells, and also a second general
area near the original end-of-curve target of the existing well. The fact that we crossed one
fracture set already in only 45’ of Monterey penetration at a 60° inclination is very promising.
What is Base Objective of the Well?
The primary goal is to place ±2100’ of open-hole horizontal interval in the oil column of the
Monterey. To construct and complete this section using MPD practices and the DDV (down-
hole deployment valve) system to always maintain the productive interval in a near-balanced
condition with non-damaging fluids, and to put that interval on production immediately after
drilling. The well is orientated to cross fractures normal to their anticipated orientation. The
lower curve and horizontal section is designed to build and hold an inclination of approximately
80° to cross through the lower, mid and upper Monterey along well length as it approaches the
bottom hole locations of the two previous wells in a down-dip structure direction.
There are many reservoir unknowns. Our best guess is that each successfully penetrated and
undamaged fracture set may contribute around 50 BOPD; and these sets may be occurring

around every 100’ of along-hole length. Thus, 2000’ would access ±20 fracture sets and deliver
around 1000 BOPD.
This Monterey structure looks to be well defined by seismic, as confirmed by the two previous
wells, in addition to the current well experiencing the Monterey top almost exactly on prognosis.
It is very thick, and has no bottom-water or top-gas risk, so fine control of planned versus actual
well inclination and Azimuth along the productive length should not be a major concern or
constraint. The vertical fractures are thought to extend through the Monterey oil column, so
being a little low or high in the general target is not seen as a major concern.
What are the Key Unknowns?
The most critical unknown is static reservoir pressure. This dictates that MPD operations must
be flexible to respond to this variable. The highest conceivable reservoir pressure is thought to
be around 5200 psi (e.g., basically normally pressured), although more detailed investigations
recently conducted could be interpreted to indicate much lower reservoir pressure (e.g.,
between 4600 and 4800 psi).
The dual-porosity nature of this play, coupled with the unknowns of fracture density, conductivity
and the recharge ability of the tight matrix all conspire to make any accurate prediction of inflow
dynamics and rapid pressure decline behavior tenuous, at best. The water base drill-in fluid
would likely provide a near-balanced BHP regime without air injection if the fractures are at the
maximum perceived pressure. Given the well defined and relatively small closure on the
structure, any one single fracture set in-flow would likely exhibit rapid decline. The key will be to
access many fracture sets in a non-damaging, near-balanced mode. The length goal (2100’)
depends on the number of fracture sets encountered, the existing MPD parameters and hole
conditions, etc.; thus, extending beyond or terminating short of this length may be
desired/required as well behavior dictates. Longer is better, but the system has limits and
safety must have top priority.
Suggested MPD Limits and Constraints
This is not intended to be a flow-drilling or UBD operation. MPD is employed to maintain a

near-balanced condition so that fracture crossing can be observed by gas cut or oil in-flow
variance, monitored BHP variance, etc., and significant oil in-flow is curtailed without damaging
same. The hydrocarbon inflow and surface pressure must be kept at a minimum so as not to
tax the surface systems fluid handling capability. As more non-damaged fracture sets are
exposed, one might expect more drilled oil and gas evolution; and, thus, perhaps increasing oil
flow and back-pressure requirements at surface. There has been no production from this
structure; reservoir pressure should be evenly distributed between the fracture sets.
Safety is the first priority. If at any time the rates or pressure are seen to be excessive, drilling
operations should be terminated. This is where the field experience of the Weatherford on-site
supervisor and the rest of the well-site management team must be applied. The at-start guide-
lines and constraints must be established by the on-site well-site management team and
adjusted as well response dictates. The existing exposure of the first good fracture below the 7-
in. liner shoe should provide some valuable observations in this regard. Once the shoe is
drilled-out and rat-hole cleaned, adjustments to MPD parameters can be conducted that may
help to define the fracture pressure, in-flow and recharge behavior. This should help target the
best MPD constraints for going forward in the horizontal section.

As a suggested starting point, the following points are offered:
¾ MPD air/fluid rate are designed to achieve the targeted near-balanced condition with
minimal surface pressure (around 50-100 psi), assuming a rechargeable fracture
pressure of approximately 4600 psi. A maximum sustained surface pressure limit might
be around 750 psi. If this level of back pressure is required with no air injection,
consideration might be given to terminating drilling at that point.
¾ Allowing for a minimal inflow while drilling from each fracture set of 10 BOPD, and
assuming sets are 100’ spaced, the maximum oil inflow might be constrained to 100
BOPD per 1000’ ft of length. If this rate is observed without air injection, consideration
should be given to stop drilling. Clearly this constraint would need adjustments as
fracture crossing is observed.
Suggested Agenda Topics for the Pre-drill-out On-Site Meeting:
Weatherford will conduct a full operations/safety orientation meeting prior to starting MPD
operations. This will include a full review of slave string placement and recovery, as well as
tripping procedures and DPV operations. Once the well-site management team reviews,
modifies and establishes the MPD constraints, the orientation meeting should also offer:
1. Background of setting and basic objectives review. Chain-of-command, preliminary

operating constraints, etc.
2. Emergency response plan and kill procedures, kill fluid design and placement
procedures.
3. Bit/BHA design for drill out, initial MPD function test and initial parameter setting, etc.
(air/fluid rates, back pressure, flare and production rates, etc.).
4. Method of TD determination.
5. A detailed well suspension, tie-back and putting-on-production program review.
6. Any other topics raised.

Appendix B
Drilling Program
Version 3.1
For Well
Castillo, Ross and Howe 2-19
DE-FC26-03NT15426 Temblor Petroleum Comp.

Appendix B Maurer Technology Inc.
DRILLING PROGRAM
Version 3.1
Well
Castillo, Ross and Howe 2-19
Location: SEC 19: T8N: R32W: SB B&M.
Santa Barbara County
Date: August 16, 2004
Prepared by: H. Imke
Note:
This program is intended as a guide. Actual operating and well
conditions may necessitate a departure from the program in the
interests of safety, wellbore integrity and prudent drilling practices.
Drlg Prog Ver 3.1/hei 1 of 16 8/16/04

Appendix B
Temblor Petroleum LLC
Castillo, Ross & Howe 2-19
General Information
WELL NAME: Castillo 2-19
SURFACE LOCATION: Sec. 19: T8N: R32W: SB B&M

Zone 5, CSPCS, NAD27, & NGVD29
N 464741.3: E1313405.1
Lat: 34° 45’ 22.191” N
Long: 120° 17’ 38.518” W
WELL TYPE: Oil & Gas
AFE #:
API #: 083-22388
D.O.G Permit No: P 304-134
ELEVATIONS: 632.4’ MSL
DRILLING RIG: Nabors # 473
PROPOSED TD: 12,550’ ± RT-MD (est. 39 days)
OBJECTIVE: Monterey Shale
CORES: None
DST’s: None
MUD SYSTEM: Water Based
H2S REQUIREMENTS: Monitors
CLASSIFICATION: Development – Confidential – “Tight Hole”

Appendix B
PROGRAM SUMMARY
1. Make cellar, set 20” conductor at 70’, dig rat hole and mouse hole and move-in Nabors
Rig 473.
2. Drill 14 3/4” surface hole to 3500’ RT minimum.
3. Run 10 3/4” casing and cement to surface.
4. Install 11” x 10 3/4” x 5000 psi casing bowl designed for deployment valve set up. Install
and test Class III 5M BOPE and casing. Drill out and perform a leak off test.
5. Drill 9 7/8” with a straight hole mud motor to approximately 9250’ RT.
6. Directional drill remainder of the 9 7/8” hole to 80 degrees, to a TVD of ± 10,082’ and MD
of ± 10,444’.
7. Run 7” casing and hang in the 10 ¾” casing at ± 3300’. Cement back to 7500’. Cement
must be 500’ above any productive zone. Test the liner hanger seal to 2500 psi.
8. Run 7” casing ‘slave’ string with ported sub/check valves and Weatherford ‘deployment
valve’ to the top of the 7” hanger at ± 3300’. Test the internal seal of the 7” slave string to
2500 psi. Perform a full function and pressure test of the entire under-balanced system.
9. Drill a 6 1/8 ” under-balanced hole horizontal approximately 1000’, TVD-10,450’ ±, MD
12,550’ ±.
10. Run a permanent packer in the 7” casing. Pull the 7” slave string with ported sub/check
valves and Weatherford ‘deployment valve’.
11. Run the 7” tie back string to surface and test the tie back to 2500 psi.
12. Rig down and move out Nabors “Rig 473”.
13. Move in and rig up a production rig and pick up and test 2 7/8” tubing running in the hole
and tie into the packer.
14. Rig up a slick line. Pull the packer plug and put the well on production.
MUD PROGRAM
Surface: Gel Chem. Adjust viscosity to clean the hole as required.
Intermediate: Gel Chem. Cypan (sodium polyacrylate) neutral-medium pH mud system
Production Formation: Water. Maintain 8-9 pH
CASING & CEMENTING DESIGN
Surface:
Minimum Casing: 0 – 3500’ RT, 10 3/4”; 45.50 lb/ft; K-55; BTC.

Appendix B
9 7/8” drift (14 3/4” hole size).
Cement: Cement from 3500’ RT to surface as per program.
Cement volume is to be calculated on the basis of gauge hole + 25%-

35% excess. Add LCM to slurry if losses are experienced while drilling.
PRODUCTION CASING:
Minimum Casing: 3300-10,500 ± RT: 7”, 26#; P110; HC Butt., N-80 ; 26# ; LT&C.
(9 7/8” hole size)
Cement: Cement from 10,500’ RT to 7500’.
Cement volume is to be calculated +15%.
HOLE PROBLEM CONSIDERATIONS
Lost Circulation:
The closest offsets had no lost circulation while drilling surface hole. Have some
lost circulation material on location. The 9 7/8” section is not noted for lost circulation.
Significant hole sloughing, swelling and running shale have been experienced on offsets
wells in the 9 7/8” section in the Sisquoc. Increasing the mud weight and/or adding Soltex as
indications dictate should control any problems. This area is also bad for key seating.
Deviation:
Deviation can be a problem in this area. Watch deviation closely and make corrections
with drilling parameters. We want to drill the surface hole and the 9 7/8” hole down to the KOP
straight. The 9 7/8” hole will be drilled with a straight hole mud motor and MWD.
Abnormal pressure:
Precautions should always be taken in case of abnormal pressure. Offsets do
not show any significant pressure issues different than the mud wts. that are programmed for this well
to TD. Ensure crew are informed and well is flow checked on penetration of these zones. Drilling
supervisor to be on the floor when penetrating these zones and all other objective zones.
Tight hole/Reaming:
Tight hole conditions are generally observed at different intervals through out
the well. Wipe the hole as needed and keep the mud in good condition. There are many shale
intervals to TD which are water sensitive and/or overpressured. Minimize mechanical disturbance by
controlling trip speeds to 30-60 sec./std. as the hole conditions warrant. Work connections to ensure
that packing around the drill string does not lead to pressuring up on the hole.

Appendix B
GENERAL RESPONSIBILITIES
1. E-mail morning reports by 8:00 AM to drilling manager and team leader. Call in each
morning to the drilling manager or his designee
2. Notify the D.O.G.G.R. field office (See permit) within 24 hrs of spudding the well.
Notify this office of lost returns on surface hole and if cement returns are not
obtained at surface. ‘Tour sheets’ are to be properly filled out and sent to the Bakersfield
office at the completion of the well.
3. Drilling Supervisor is to be familiar with and enforce regulations as they pertain to work at
the site.
4. Confirm that the lease is properly prepared. Have all garbage and metal removed from
the lease after drilling and contained in proper recycling/disposal bin. Ensure mousehole
and rathole are covered immediately after rig demobilization.
5. The Drilling Supervisor is to hold a prespud meeting w/ crews on location and record in
tour book. Weekly meetings are to be held thereafter. The drilling supervisor is to confirm
that the rig crews are trained in the operation of BOP’s and that all drillers have a valid
first line supervisor’s BOP certificate.
6. The Drilling Supervisor is to ensure the hole is properly filled on trips and trip records are
properly completed. Ensure that BOP’s and accumulator are all satisfactory prior to
drilling out. Conduct BOP drills at drillout and at least weekly thereafter. Conduct flow
checks as per D.O.G.G.R. regulations. Log all BOP drills in the IADC log book.
7. The GL (632·4’) and RT (19’ 3”) elevation and location (are to be noted on the first report.
8. All field tickets are to be coded and signed by the drilling supervisor and forwarded to the
Bakersfield office on a weekly basis. Any discrepancies are to be brought to the attention
of the drilling manager. The AFE number and well name must be recorded on all field
tickets.
GEOLOGIC PROGNOSIS
Projected Formation Tops
Sisquoc – 5660’
MontereyShale ---– 9600’

Appendix B
DRILLING PROGRAM
SURFACE HOLE: 14¾” – 3500’ RT
1. Hold a pre-spud meeting with tool pusher, crew and drilling fluid company representative.
2. Pick up a pendulum string of 8” drill collars. BHA should be discussed with drilling
manager prior to picking up.
3. Spud in with gel mud and drill a 14 3/4” hole to 10 ft below surface casing setting depth.
Ensure pump rate and rotary speed are minimized while drilling through bottom of
conductor.
4. Keep the mud weight to a minimum and adjust the viscosity as required to clean the hole.
Work the pipe on connections to minimize the risk of mud rings.
5. “Single-shot” survey every 300’. Expand survey interval depending on deviation.

Maximum allowable deviation desired is 2°. Discuss surveys and drilling parameters with
drilling manager.
6. At surface pipe TD, wipe the hole to the conductor shoe and “strap” the drill string out of
the hole. If an incompetent formation is encountered at the casing setting depth, deepen
the hole to ensure that the shoe is set at least 30’ into a competent formation.
7. Condition mud and hole prior to running casing. If gravel or lost circulation was a
problem while drilling, it may be necessary to raise the viscosity.
8. Tally, visually inspect and run casing as per Casing and Cementing section.
9. Wait on cement a minimum of four hours. Check cement samples before slacking off.
10. Cut off the casing and weld on an 11” x 9 5/8” x 5000psi (SOW) casing head complete
with wear bushing, side outlets and gate valves. Pressure test the weld to 1000psi for 15
minutes. Note the type of bowl, serial number and pressure rating on tour sheets and
morning report. Ensure the casing head is on straight.
11. Install the BOP stack. Pressure test BOP’s, 10-3/4” casing and manifold to 200psi and
2500psi for 10 minutes. Run an open-ended test plug and test the BOP and manifold to
5000psi as per Well Control section. All BOPE must be as defined by the D.O.G.G.R.
manual MO 7, DOG Class III, 5M with hole fluid monitoring equipment ‘B’.
- All pressure tests are to be witnessed and approved by the drilling supervisor
and the D.O.G.G.R. as required.
12. Complete the rig inspection and well control sheets (post sheets in the doghouse). All
serious deficiencies must be remedied prior to drill out. Note deficiencies and actions
taken on morning report.

Appendix B
INTERMEDIATE HOLE: 9⅞” – 10,500’ RT (TD)

1. Clean out the insert, cement, shoe and drill 10’ of new hole and perform a leak-off test.
Immediately report leak-off test results to drilling manager. Drill ahead with the 9 7/8” hole
using a performance mud motor and MWD to the determined KOP then pick up a 2 degree
motor and drill the curve section to 10,500±.
2. At total depth, circulate and condition mud, POOH and make up a bull nosed hole opener
and a 3-point reamer, ream the curve section carefully and back circulate every 300’ in the
curve section. Ensure the hole is conditioned as per program and in consultation with the
drilling manager.
3. Run the 7” casing as per the casing and cement program.
4. Test the liner hanger/packer to 2500 psi.
5. Run a 7” slave string with subs with either check valves or gas-lift type mandrels and the
‘Weatherford’ down-hole deployment valve. Land-out in the 10 ¾” casing bowl. Test the slave
string internally to 2500 psi.
6. Re-test the BOP stack if required by the D.O.G.G.R.
7. Nipple up the ‘Williams 7000” rotating head and all of Weatherford’s under-balanced
equipment. Perform a full function test of the entire under-balanced system. Notify the
D.O.G.G.R. of the test so that they may witness if desired.
PRODUCTION HOLE: 6⅛” – 12,550± - RKB MD

1. Clean out the plug, cement, shoe and directionally drill the horizontal section (1000’±)
with a Mud Motor, MWD and down hole pressure sub.
2. Run a Weatherford permanent packer assembly and set in the 7” casing.
3. Pull the 7” casing slave string and run a 7” tie back string. Test the tie back to 2500 psi.
4. Rig down and move out Nabors Rig 473.
5. Move in a production rig. Run 2 7/8” tubing and retrieve the plug out of the permanent
packer assembly and put the well on production.

Appendix B
WELL CONTROL
(1) Minimum BOP stack layout and manifold system are as per D.O.G.G.R. regulations.
Ensure flare line is staked or adequately weighted down.
(2) Drill string blow-out prevention peripheral equipment needed:

- drill pipe inside BOP with removable handles
- drill pipe stabbing valve with removable handles (in open position)
- upper and lower kelly cocks (with wrenches)
(3) Test the annular preventer, the HCR valve, and all rams by cycling each item from both
the rig floor and remote control stations and verify full and correct function of every item..
(4) Test the accumulator operation by:

(a) Fully opening the annular preventer and rams.
(b) Charging the accumulator to full working pressure then disconnecting the charge
pump.
(c) Opening the HCR valve and fully closing the annular preventer.
Checking that closure was within 60 seconds and that accumulator
pressure remains above 1200 psi.
(d) Reconnecting the charge pump and checking that full working pressure
is recovered within 5 minutes.
(e) Closing each set of rams in turn and checking that closing time is less
than 30 seconds (from full accumulator working pressure and with
the charge pump disabled).
(5) Check that each nitrogen bottle is charged to at least 1800 psi.
(6) Pressure test the BOP system with water. Each test to last 10 minutes at 200 psi then 10
minutes at 5000 psi.
(a) Flush the system of all mud prior to testing.
(b) Any indication of leakage or a pressure loss of more than 10% of the test pressure
over a 10-minute period is a failure that requires corrective action
(This assumes a test plug is not in place).
(c) Pressure is to be applied in the same direction that a kick would
pressurize the item being tested.
(d) All valves downstream of the item being tested are to be open.
Pressure test the kill line and each valve on that line by increasing pressure upstream
of the check valve.
(e) If any test pressure exceeds 67% of casing burst pressure a hanger test plug must
be
used.
(f) The following must be recorded in the tour book:
- BOP tested
- Test duration
- Test pressure observed at the start and finish of each test.
Test: a) each ram
b) The annular preventer against drill pipe (1500 psi high)
c) Each valve on the drilling spool
d) Each valve and choke in the manifold
e) The drill string inside BOP
f) The drill string stabbing valve
g) The kelly cocks
h) The kill line
i) Surface casing

Appendix B
(7) ALL FLANGES AND FITTINGS THROUGHOUT THE BOP SYSTEM (STACK,
MANIFOLD AND ASSOCIATED LINES) ARE TO BE RE-TIGHTENED AFTER ONE
DAY OF DRILLING.
(8) Air shut-offs on all diesel motors to be tested prior to drill out and every week thereafter.
(9) Record all the above checks and tests in addition to those listed below with results on
"Daily Drilling Report". The following check should be completed as detailed
below:
a) Daily:
(i) Measure standpipe pressure at the well-kill pump speed and update the Kick
Control Worksheet. Post Kick Control Sheet in doghouse and manifold shack
upon completion.
(ii) Close and open a set of pipe rams or the annular preventer (each tour, alternate
floor controls with remotes).
(iii) Close and open the blind rams after each trip out of hole.
b) At Least Weekly:
(i) Driller's engine shut-offs are to be tested.
(ii) A blow out prevention drill is to be held with each crew.
(iii) Tighten BOP bolts
c) (i) Complete a Trip Worksheet for each trip and keep on record to end of hole.
(ii) Keep hole full at all times.
(10) Kick Control Worksheet to be posted in the doghouse.
(11) Drillers must hold current well control certificates. Record drillers names and dates of last
certification.
(12) All rig crews to be trained in operating the BOP equipment and a rig blowout prevention
drill held for each crew prior to drill out.
(13) Drillstring pressure gauge at the choke manifold must to be hooked up and working at all
times.
(14) All mud level indicators, flow indicators and alarm settings are to be checked daily. Any
malfunction is to be corrected immediately. PVT must alarm at +/- 5.0 bbls and the flow
show must alarm at +/- 10% of measured flow.
(15) The Driller’s Method (constant drillpipe pressure) is to be used to control a kick. If the
shut in casing pressure exceeds the posted MACP, the Low Choke Method is to be used.

Appendix B
MUD PROGRAM
Interval Type Density Viscosity WL Remarks
0-3500’ Gel-Water Min. 50-80 12-15 cc Operate all solids

equipment.
3500-10,500-Gel-Cypan 9-11.0ppg 38-44 4-6 cc
10,500-12,550-Water 8.33ppg Maintain a 8-9 pH
Maintain the Mud Wt. as the hole conditions dictate.

Operate the solids equipment as per the Mud Engineer.

Appendix B
CASING AND CEMENTING
10 3/4” SURFACE CASING
Surface Casing Design
INTERVAL LENGTH DESCRIPTION
0 – 3500 ft 3500 ft 10 3/4”, 45.50 lb/ft, N-80, BTC
Minimum Performance Properties:
ID: 9.950”
Drift: 9.875”
Burst: 3580 PSI
Collapse: 2090 PSI
Joint Strength: 931
Body: 1236
Optimum Torque (Ft-lbs.) (Buttress)
1. Run surface casing in the hole as follows:
(a) 10 3/4” float shoe (thread-locked)-PDC drillable
(b) One joint of 10 3/4” casing (casing collar to be thread-locked)
(c) 10 3/4” float collar- PDC drillable
(d) One joint 10 3/4” casing (casing collar to be thread-locked )
(e) 10 3/4” casing to 3500 ft (ensure casing is doped with API Modified)
2. Arrange for power tong services.
3. Visually inspect the surface casing for signs of transport damage, clean and inspect
threads.
4. Strap casing on rack.
5. Place clean thread protectors on the pin end of the pipe to protect the threads from
handling damage between the pipe racks and rig floor. Several thread protectors should
be cleaned and used for this purpose or use quickie protectors if they will work.
6. Assemble the guide shoe, shoe joint and insert valve, applying thread-lock to thread
ends.
7. Make up and run the 10 3/4” casing as per buttress specifications. Apply thread
compound over entire surface of threads before stabbing.
8. When stabbing, lower casing slowly to avoid damaging threads. Stab vertically with the
assistance of a man on the stabbing board. Rotate slowly to ensure proper thread
engagement. If any threads are damaged while stabbing, lift up, clean the threads and
repair damage if possible with a 3 point file. Clean filings and re-apply thread compound.

Appendix B
9. Centralizers to be placed as follows:
1 – 6 ft above guide shoe

1 – 1st. collar
1 - on each of the next two casing collars uphole
- remaining centralizers every 3rd. collar to surface.
10. Pick up and lower casing string carefully. Running time should not exceed 25 secs/joint.
Check to make sure that the casing is filling as you are running it in the hole.
11. When landing the casing, ensure that the top of the last joint is close to the table. Drill the
surface hole to fit the casing.
12. Install cementing head on last joint and circulate to TD. After casing is landed, circulate
and condition the mud.
13. Reciprocate the casing in short strokes until the pipe is free, then increase stroke length
to 15 – 20 ft. Circulate the hole clean, reduce viscosity, gel strengths and yield point, if
possible, for cementing. Circulate until returns are clean, or a minimum of two full
circulations.
NOTE: Ensure that rig hands clear the V-door area completely and move to the
rear
area of the catwalk as tubulars are being hoisted from the cat-walk and into
the derrick!
Surface Casing Cementing:
Casing is to be cemented from total depth to surface with type III cement plus additives as per
program. Ensure a cementing head and rubber plug is used. Cement volumes are calculated
based on gauge hole plus 25% - 35% excess and an interval length of 3500 ft. If circulation was
lost while drilling, ensure an adequate amount of LCM is mixed with the cement. If total losses
occur while drilling, be prepared to use a ‘spaghetti’ string to top up cement in the annulus.
1. Cement the casing as follows:
(a) Install plug loading cement head complete with top plug.
(Supervisor to witness plug being loaded) Pump 15 bbl water
spacer. Pressure test treating lines to 2000 psi.
(b) Mix and pump Halliburton light Premium plus with 1% Calcium
chloride, .05% FWCA, .5% Halad 322 mixed with fresh water to
13.50 ppg. Tail 500’ of Premium Plus with 1% calcium chloride
mixed with fresh water to 14.8 ppg. Mix at 5 to 6.0 bpm.
(c) Release the top plug and displace cement with mud at a rate of
at least 6.0 bpm. Final volumes to be determined on location in
consultation with the cement company engineer. Decrease the
displacement rate on the last 10 bbl If lost circulation occurs,
stage in last 10 bbl of displacement.
(d) Bump plug to 500psi over pumping pressure. Release pressure

and check for back-flow. If float does not hold, shut-in and hold
back pressure for four hours. Release pressure in increments to
avoid creating a micro-annulus. If plug does not bump on

Appendix B
theoretical displacement, do not overdisplace by more than

two thirds of the shoe joint volume.
(e) Centralize casing in the rotary table. Do not cut-off landing joint
sooner than four hours after bumping plug.
7” INTERMEDIATE CASING
Casing Design
Casing Interval Length Description
3300 – 10500 ft 7200 ft 7”, 26 lb/ft, P 110 HC Butt, N-80, LTC, SMSL
P-110 Butt. On bottom 1500’
Casing Properties
7”, 26 lb/ft, HC-P110, BTC 7”, 26#, N-80 LTC

I.D. (in): 6.276 6.276
Drift (in): 6.151 6.151
Burst (psi): 11.220 7240
Collapse (psi): 6210 5410
Joint Strength (1000lbs): 853 519
Optimum Torque (Ft-lbs): 3640
Min Torque (Ft-lbs): 2730
Max Torque (Ft-lbs): 4550
1. Run casing in the hole as follows:

(Buttress threads are to be run from TD back through the transition “curve”)
(a) 7” float shoe
(b) Two joints 7” casing
(c) 7 ” float collar.
(d) Install Two centralizers on the first four joints. One at 15’ and on the collar or
with a stop collar if necessary. Run centralizers on every collar from the first
four joints through the entire curve . Then 1 every third joint to 7000’. Use semi-
rigid centralizers.
2. Visually inspect the intermediate casing for signs of transport damage. Clean and
inspect threads and re-drift casing.
3. Strap casing on the rack.

Appendix B
4. Place clean thread protectors on the pin end of the pipe to protect the threads
from handling damage between the pipe racks and rig floor. Several thread
protectors should be cleaned and used for this purpose. Use ‘quickie’ protectors
if they will work.
5. Assemble the float shoe, shoe joint and float collar, applying thread-lock to the
thread ends of the first 3 joints.
6. Make up and run the casing using the optimum torque values. Apply thread
compound over entire surface of threads before stabbing. Use a fill up casing
tool when running this casing.
7” Intermediate Casing Cementing

1. Cement the casing as follows:
(a) Install plug loading cement head, use a bottom and top plug. Pump 20 bbls. of mud
flush spacer. Pressure test treating lines to 2000 psi.
(b) Mix and pump Halliburton HI Temp cement with 0.75% Halad 322, 0.2% HR-5, 0.2%
Super CBL mixed with fresh water to 15.8 ppg. Mix and pump at 5-6 BPM.
(c) Release the top plug and displace cement with water at a minimum of 6 BPM.
(d) Bump the plug to 500 psi over the pumping pressure. Release the pressure and
check for flow back. If the float does not hold, shut-in and hold back pressure for four
hours. Release the pressure in increments to avoid creating a micro-annulus. If the
plug does not bump on the calculated volume, do not displace over 2/3 the volume of
the shoe joint.
PREPARED BY: ____________________________ DATE: __________________
APPROVED BY: ____________________________ DATE: __________________

Appendix B
LOGGING PROGRAM
CONTACTS
SERVICE COMPANY CONTACTS:

SERVICES CONTRACTOR TELEPHONE
SURVEY Blake Surveying
LEASE CONST. General Production (Tom Burke) 661-203-3736
CONDUCTOR General Production (Rusty) 661-765-5330
DRLG. RIG Nabors #473 661-322-4983
CASING ACC./Cent. Gemoco 661-391-9022
10 3/4” Casing J.D. Rush 661-392-1900
7” Casing J.D. Rush 661-392-1900
UBD Service Weatherford- Gary Colvin 661-746-0887
DRLG. MUD Geo Drilling Fluids 661-325-5919
CEMENTING Halliburton (Gary Shinabarker) 661-393-8111
LOGGING Horizon 805-736-2114
WELLHEAD United (Bob Allen) Shreveport, LA 318-424-4700
ELECTRIC LOGGING Halliburton (Lanny Jones) 661-831-1374
TRAILER ( ) BLL 661-589-9080
PVT/ELECTONIC W/rig Epoch 661-328-1595
TRASH TRAILER
SUPERVISION Imke Consulting, Inc.Lloyd Rosenbaum 661-619-1596
Water
DIRECTIONAL EQUIP. Scientific Drilling 661-831-0636
Solids Equipment Brandt 661-588-8503
WATER- Vac TRUCK Speed’s 805-925-1396
LAYDOWN B&L Casing 8 661-589-9080
SHOCK SUB/JARS Black Max 661-327-0226
STABS Downhole Stabilization 661-631-1044
POWER TONGS B&L Casing 661-589-9080
Tanks/water line Tanks-speed’s- water lines – Rain for rent
D.O.G.G.R. Division of Oil, Gas and Geothermal Res. 805-937-7246
Ed Brannon Fax 805-937-0673
Casing Hanger Weatherford-Larry Peabody 661-589-6743
BOPE Testing BLL 661-589-9080
Auto Driller Wild Cat (Phil Morse) 661-330-0317
Welding Tom Burke (General Production) 661-203-3736

Appendix B
Choke equipment Swac0 661-587-7787

Gas buster/Flair/Tanks Pacific Process Systems 661-589-8844
Jars Black Max- Mike Merriett 661-327-0226
COMPANY CONTACTS:
Temblor Petroleum LLC Office Fax: 661-395-5730

2000 Oak St.
Bakersfield, CA. 93389
Harold Imke Office: 661-397-6846
SUPERINTENDENT: HOME HOME FAX CELLULAR

Harold Imke* 661-397-6846 661-397-6846 661-809-2350
GEOLOGY
* - Primary drilling contact
DAILY REPORTS TO BE EMAILED TO BAKERSFIELD OFFICE BEFORE 8:00 AM.

Appendix B
Daily Drilling Diary and Operational Comments
Appendix C
The following summarizes daily drilling operations in well sections from surface hole to final TD.
The surface hole was drilled to 3561' in six days. Bit #1 was a 14¾-in. Baker Hughes tricone bit
Type GTX C1. While drilling the surface section, 50 bbl of mud were lost at 224'. This is not an
uncommon occurrence in the general area and was successfully treated with standard LCM
(lost circulation material) placement. Final mud properties were a weight of 9.3 ppg and a
marsh funnel viscosity of 52 seconds. The well was successfully cased at 3555' MD with 10¾”,
45.5#/ft N80 BTC surface casing, cemented and pressure tested on Sept. 20, 2004 (Day 9).
Special Surface Casing Design
The larger-than-normal surface casing had a burst pressure of 5200 psi and was designed to
contain full estimated reservoir pressure. This casing was the outer string of the concentric
slave string MPD/underbalanced system. The gas injection holes in the inner slave string of 7”
tie-back liner could allow the surface casing to be exposed to the well pressure if the Drilling
Deployment Valve™ failed. It likewise would have been exposed to high pressure when the
drilling annulus (7” casing x 3½” drill pipe) was pressured to open the DDV.
Drill 9⅞” Intermediate hole and upper curve into top of the Monterey Formation
The first part of this task was to drill a 9⅞” vertical intermediate hole to a kick-off point (KOP) of
9143'. This vertical section was drilled using directional tools to keep the hole straight in the
steeply dipping beds of the Miocene Sisquoc formation.
Interval 3561' to 5006'
A total of 1445' was drilled in 54 drilling and circulating hours, at a total time of 4½ days. Bit #2
was HTC MX-C1 tricone (IADC code 117) fitted with 1X14, 3 x 16 jets. Directional assembly
No. 1 employed a 7¾” motor with a 1½° bent sub. Drilling rate was about 30 ft/hr in both
rotating and steering modes. Approximately 3% of the footage was drilled in the steering mode
to maintain vertical angle and the remainder was drilled in rotary mode. The water-based mud
density was gradually increased to 10.8 ppg and funnel viscosity to 48 sec. The bit was pulled
when penetration rate slowed. The bit showed wear on the outer row of teeth.

Appendix C Maurer Technology Inc.
Wear on Bit #2
A total of 1048' of vertical hole was constructed in 56 drilling and circulating hours, at a total
time of 3 days. Bit #3 was an HTC MX-1 tricone (IADC Code 117) fitted with 1x12, 2x15 jets.
Directional assembly No 2 employed a 7¾” motor with a 1½° bend sub. Drilling rate was about
20 ft/hr in both rotating and steering modes, with 5% of the footage being steering and 95%
rotated. Mud density was gradually increased to 10.9 ppg and funnel viscosity to 49 sec/qt.
The bit was pulled when drilling rate decreased after 56 hours. The bit showed wear on the
inner row of teeth. Mud logging samples indicated the top of the Sisquoc was penetrated at
around 5725' MD.
A total of 3089' of vertical hole was constructed in 119 drilling and circulating hours, at a total
time of 5 days. Bit #4 was a Security PDC, HC805, Jets 5x12, 2x15. The directional assembly
No 3 employed a 7¾” motor with a 1½° bent sub. The drilling rate achieved was 34 ft/hr while
rotating and 10 ft/hr while steering. Around 10% of the footage was drilled in the steering mode.
The previous conventional tricone bit runs were unsatisfactory in the vertical hole section from
both a drilling rate and footage standpoint. The first of the special efforts to improve the drilling
came with the use of Bit No.4, a PDC bit. The bit would drill up to 100 ft/hr when rotating, but it
unfortunately was a straight hole bit design with a long shank and would hang up on the side of
the hole when sliding. This reduced the effective rate of penetration in the steering mode by an
order of magnitude to 10-15 ft/hr.
There were minor hole problems observed in this interval with the Sisquoc Formation. It is
known as a pressured shale. In this case the shale appeared to be stressed as a result of the
Central California Coast that is undergoing geological movement. There may also be some
geo-pressure due to excessive fluid in the shale. There were very large cavings observed and
some “reaming to bottom on trips” was required. This condition gradually improved as the mud
density was increased from 10.6 ppg to 11.4 ppg, but never completely disappeared.

Large Cavings from the Sisquoc
Interval 9143' to 9705' (Upper Curve)
The upper curve drilling plan called for a build rate of 6½°/100' at 298° Azimuth. A total of 562'
of upper curve was drilled from 1° to 23.5° hole angle in 72.75 drilling and circulating hours, at a
total time of 4 days. Bit #5 was a HTC MX S18 tricone (IADC code 447) (insert cutters) fitted
with 3x20 jets. Directional assembly No. 4 employed a 6½” motor with 1½° bent housing.
Drilling rate was 9½ ft/hr with 35 kips on bit while rotating and 7¾ ft/hr with 35 to 50 kips on bit
when steering. The bit was rotated 299 ft and steered 263 ft for 53% rotating and 47% steering
footage. The drilling rate was disappointing with this insert cutter bit, which was pulled for slow
penetration rate. It was missing an insert, but otherwise showed very little wear.
Wear on Bit #5
Mud density was raised from 11.2 ppg to 11.7 ppg in this upper curve interval and a 47sec/qt
funnel viscosity maintained. Mud logging samples showed variability that indicated the top of
the Monterey shale sequence had been penetrated near 9619'. It was necessary to ream back
into hole from 8284' to 8450' with the new directional assembly.
At a depth of 9161' the operator insisted the build rate be reduced to 3°/100 ft, since he was
unsure of the top of Monterey shale section. A short wiper trip was conducted at 9470' and

bridges were observed at 9370–9390'. At a depth of 9705', another wiper trip to surface casing
observed tight hole at 9470–9707'. At a depth of 9619' build rate was increased since it
appeared the hole was nearing the top of the Monterey target.
A total of 83' of upper curve was drilled from 23.5° to 28.14° hole angle in 22.75 drilling and
circulating hours, at a total time of 2 days. Bit #6 was a MX C-1 tricone rock bit (IADC Code
117) fitted with 3x20, 1x18 jets. Directional assembly No.5 employed a 6½” motor with 1½°
bent housing. Drilling rate was 4.8 ft/hr rotating with 45 kips on bit and 4.8 ft/hr steering with
55K. The bit was rotated 24' and steered 59’ for 71% steering footage.
Drilling rate was also disappointing with this tricone bit, and the bit was pulled for slow
penetration rate. Minor tooth wear was observed. Mud density was maintained at 11.7 ppg in
this interval with a 46 sec/qt funnel viscosity. Mud logging samples still showed the transition
from the lower Sisquoc to the upper Monterey. There was concern expressed about the length
of time (approximately 14 days at this point) the Sisquoc had been exposed as open hole. The
drill pipe showed a black film of iron sulfide with a mud pH in the 7 to 7.5 range. A trip to repair
the top drive was conducted at a depth of 9782' and 35' of fill was observed on bottom. At a
depth of 9788' a wiper trip was conducted in preparation to trip for a new bit. This wiper trip
required reaming of a tight-hole interval, 9630'–9567', with 25' of fill observed when going back
to the bottom of the hole. Then a round trip was conducted for bit #7.
Iron Sulfide on Drill Pipe
Interval 9788' to 10,261'
A total of 473' of upper curve was drilled from 28.14° to 58.48° hole angle in 38.75 rotating and
circulating hours, at a total time of 2 days. Bit No 7 was a Security PDC, MGR75KP, fitted with
5x18 jets. Directional assembly No. 6 employed a 6½” motor with 1½° bent housing. Drilling
rate was 10.5 ft/hr when rotating with 2-10 kips on bit and 14.5 ft/hr when steering with 5-30 kips
bit weight. The bit was rotated 72' and steered 401’ for 85% steering footage. Penetration rate
was slightly better than tricone bits used previously, and gradually increased as the formation
became more brittle. The dominant steering time employed in this interval was to increase

angle. This bit was pulled to run the 7” liner. The bit showed some matrix wear on the bottom,
with one pocket partly exposed. There was no visible cutting wear.
Wear on Bit No. 7
The mud logging samples showed that the upper curve had penetrated the top of Monterey
target zone at almost exactly the estimated TVD of 10,000'. Samples showed increased
siliceous shale. At 10,235–10,240' MD, a major fracture with gas, oil stains, and calcite was
encountered. At 10,258' after the daily short trip to wipe the hole, it was decided to line the hole
at this point to avoid putting a potentially productive fracture behind the 7” liner. The last wiper
trip had indicated only 5' of fill on bottom at 9788'. At a depth of 10,195', a short wiper trip to
9650' was conducted with no hole problems observed.
The drilling assembly was then pulled and the hole was reamed with a 9⅝” bull-nose reamer
assembly on 5” drill pipe. A bridge was noted at 10,145' going in hole. The well was circulated
and the assembly pulled with minor indications of tight hole at 10,131–9956'.
Conventional tricone tooth and insert bits were unsatisfactory in this interval from both a drilling
rate and footage basis. Improvement came with the use of directional PDC bits. Drilling rate
was only slightly better than with tricone bits, but the PDC drilled 473’ and showed only some
matrix wear. There was fill-up of very large cavings, apparently from the exposed Sisquoc shale
section observed during bottoms-up on circulations. The 11.7-ppg mud density reduced some
of the caving, but it appeared that caving was still occurring in the freshly drilled part of the hole.
There was a thin coat of iron sulfide on the drill pipe, possible as the result of a 7-7.5 pH mud
condition.
Installing Intermediate 7” Liner at 10,216'
On Day 32, 6900' of 7” intermediate liner was run to 10,216' on 5” drill-pipe and hung at 3279'
MD in the surface casing. When the liner was being run, between 10,131–10,216' it began to
stick and became difficult to reciprocate. At 10,216' the liner was stuck on bottom and could not
be reciprocated. The rig circulated for about 50 minutes with 90-95% returns. Apparently, when

cavings from the bottom of the well reached the liner hanger assembly at 3270', the well packed
off, pump pressure spiked from 500 to 1400 psi, and returns were lost.
It appears that the rapid and unexpected spike in circulating pressure set the hanger slips.
Further circulation was not possible. Several hours later, the hanger packer was set. The
casing was not cemented at this time. Three days later on day 35, the casing lap was tested.
Then the 7” liner was successfully squeezed cemented through the liner shoe with 286 ft3 of
cement that filled the annulus from 10,216–9,200'. The cement top behind the liner was
observed where expected on a temperature log.
The tie-back 7” slave string was then run and landed at 3285.46'. It could not be pressure-
tested due to a stack-out calculation error. It was reset at 3306.22' and then passed the
pressure test.
Productive Interval 10,258' to 12,789'

Rigging Up for MPD Operations
A packer was run in, set in the 7” hanger, and successfully pressure tested the seal on the 7"
tie-back string/liner hanger assembly. This packer was then pulled and laid down. The 6⅛”
drilling assembly was picked up and directional tools checked. The assembly was RIH to top of
cement at 10,004' where cement was cleaned out to the 7” liner shoe. The shoe track was
drilled out and a successful PIT was conducted.
To begin MPD, the concentric annulus was displaced with air and at a maximum pressure of
1400 psi to unload the drill pipe annulus. The surface choke on the underbalanced-drilling
manifold was inadequate and would not properly operate. This choke had an air balance
operating system that was unstable at the volumes and pressures encountered. The choke was
bypassed and a plug valve in the “straight through-line” (of the manifold) was successfully used
as a fixed choke for all further drilling.
Directional Manifold

Interval 10,258' to 11,319'
A total of 1061' of 6⅛” open hole tangent and lower curve was drilled in 3 days using the MPD
slave string air-lift method described. The hole was drilled from 10,258' MD at 64° (10,073'
TVD) to 11,319' MD (10,363' TVD). The interval was drilled with a single PDC bit in 64.5
rotating hours at an average rate of penetration of 14.5 ft/hr. At the start of this interval, an
unplanned tangent section was drilled in the rotary mode from 10,323–10,642' at 62–63° angle
to lower the position in the Monterey section.
The penetration rate reflects 632 ft of tangent drilled rotating and then 429 ft drilled sliding to
complete the lower curve build section to the target ±80° hole angle. The assembly was then
tripped out of the hole to check the bit, motor, and hole condition. PDC bit #8 was in good
condition and was rerun; however, the worn drilling motor was changed. There was no unusual
drag on the hole and minimal cavings were observed on circulating bottoms up after the trip.
Air Compressors
Comment on initial MPD Operations
There was a problem originally with surging the hole due to the large concentric annulus (10¾”
x 7”). The compressor pressure surged from 8000 psi to 1400 psi on a 50–60 min. cycle.
Bottom-hole pressure changed from 4000 psi to an estimated 4400 psi in the same intervals.
Air volume was generally 700 to 1200 cfm in the period and there was minimal choke pressure.
In the drilling plan, the MPD provider had intended to use a larger air volume with a 150 psi
back pressure to control surging. This was not done at the start, and after representation to the
service provider, the original plan was re-instituted by a replacement service company
supervisor.
At 11,000' MD, air volume was increased to 1833 cfm with 200-psi back pressure on the choke.
Surging stopped at 900 psi compressor pressure and 200-psi choke pressure. Bottom-hole
pressure stabilized at about 4200 psi. On subsequent trips, circulating bottoms up indicated
that there was no sign of caving or sloughing in the hole due to the cycling of the pressure in
early MPD operations.

Compressor Pressure Surges

Stabilized Pressures
The Drilling Deployment Valve was never used since there was no major gas or oil flow or
reservoir pressure. On all trips the hole was filled with water before tripping. After all trips, the
water column was circulated bottoms up before air injection was resumed.
In the original well design, the bottom of the Monterey fractured interval was expected to occur
near 10,350' TVD. When drilling at 10,327' TVD the gas detector showed a marked decrease in
gas. The gas appeared to resume at a horizontal distance of 312 ft at a TVD of 10,362'. At a
measured depth of 11,153' a marked change in drilling characteristics was observed, and the
driller noted that the bit was easier to control in this interval. It appears that the well may have
drilled out of the bottom of the Monterey highly fractured target at this point, and then returned
into the section (from approximately 11,300–11,900’ MD). This could be either a fault (no
evidence of that) or that the Monterey dips around 6.4° to the northwest. Good micro-fracturing
and oil and gas shows did not appear again until 11,900' MD (about 10,460' TVD). This
interpretation of well placement is consistent with the seismic prognosis indicating that the target
Monterey shale was dipping to the northwest along the well path.
The change from surging the hole about 90 bbl to a steady-state flow changed the mud logger’s
gas readings in the interval where the well path might have dropped out of section. So the
collaborating evidence is not altogether clear with respect to how much of the mid length was
below the highly fractured shale member.

Interval 11,319' to 12,789'
Continued drilling of the 6⅛” “horizontal hole” was delayed another two days by rig repairs.
While waiting, a gamma ray sensor was added to the MWD. From day 53 through day 66, the
well was drilled 1470' to TD in 13 days. There were 147.5 hours (47%) of the total 312 hours
listed as drilling or rotating hours which included surveys and connections. The average drilling
rate was about 10 ft/hr. Of the 1470 ft drilled, 1234' were rotated and the remaining 173' were
corrective directional sliding. The bottom-hole temperature was measured as 230–260°F.
During this period of 13 days, there were eight trips to change bits, motors, or survey
equipment. Some trips showed multiple failures:
Mud motor 5 failures

MWD or survey electronics 2 failures
Bit failure or wear 4 failures
On Day 53, rig repairs were finished and PDC bit #8 was rerun with a gamma ray MWD sensor.
This bit drilled from 11,319–11,382' in 3.5 hours.
Day 54 was spent drilling from 11,382–11,516' (7 hr). A trip was then conducted for failure in
directional electronics in MWD. When back on bottom, traces of oil (<1 bbl) were observed, as
well as increased gas in bottoms-up.
Day 55 was spent drilling from 11,516–11,804' (35½ hr). Drilling rate was decreasing, and the
assembly was then pulled for failure of the mud motor bearing pack (sealed bearings lost seal).
The gamma-ray log showed a single peak at 11,690'. At survey depth of 11,700' MD (10,426'
TVD), well inclination was 81° on an azimuth of 299°. There were no clear drilling breaks
observed in this interval.
After tripping in with a new motor, Day 56 was spent drilling from 11,804–11,849'. Again, the
mud motor bearings froze up (sealed bearing motor). Only traces of oil and gas were observed
in the bottoms up circulation prior to tripping out of the well to replace the motor.
Day 57 was spent tripping for the new motor, and drilling from 11,849–11,890' MD. After drilling
41' and 3.5 hours, the mud motor failed again. The bottom-hole temperature from MWD
readings at the time of failure was 248°F after 4.5 hrs of circulating. Another trip was required to
replace the motor.
After getting back to bottom and washing bridges at 11,014' and 11,563' (first bridges noted in
hole since setting the 7” liner was set), Day 58 was spent drilling to 12,074'. No significant gas
or oil was observed in the bottoms up circulation. Penetration rates of 4–6 ft/hr were gained in
the sliding/rocking mode with 60 kips stacked over the bit. Drilling rate while rotating was 15–25
ft/hr with 14 kips on bit. Bottom-hole pressure was maintained near 4400–4500 psi. The
gamma ray log (below) started showing continuous peaks at around 11,900' MD, although there
were no obvious drilling breaks, but a minor increase in bottom-hole temperature was observed.

Increase in Gamma Ray
Day 59 was spent drilling in a combination of rotary and sliding/rocking mode from 12,074–
12,168'. Drilling rate was very slow but there was increasing evidence of fractures with gas and
oil observations at surface.
Day 60 was similarly spent drilling from 12,168–12,193' with very slow drilling. A trip was made
to replace a suspect motor, and 55 gallons of high-temperature lubricant were added to the drill-
in fluid. Bottom-hole temperature after the trip was monitored at 258°F; after 4 hr of circulating it
cooled to 238°F. After being pulled, bit #8 was 80% worn, showing a junk ring and showing
possible ⅛” out of gage. And it was also noted that an Allen screw was missing from the MWD
hang-off sub.

Bit No. 8, Showing Junk Ring
A new PDC bit (#9) and sealed bearing motor were run on Day 61. A good gas flare was
observed for 20 minutes on the bottoms-up circulation, and about 1 bbl of oil was gained. The
maximum recorded bottom-hole temperature of 258° was observed at this time. Penetration
rates were 30 ft/hr in the rotary mode, and 7–13 ft/hr in the slide/rock mode. After drilling 23',
the motor failed (broken shaft) and a trip was conducted. At surface the PDC bit appeared
damaged (ringed on bottom), perhaps caused by the missing MWD screw left in the hole.
In the next 4 days, three new insert tricone bits were runs (HTC MX20DX Nos. 10, 11, 12). Bit
#10 drilled 164' in 16½ hours, at an average rate of 10 ft/hr; bit #11 drilled 189' in 16 hours, at
an average rate of 11.8 ft/hr; bit #12 drilled 219' in 21 hours, at an average rate of 10.4 ft/hr.
Day 62 was spent tripping in the hole with the new bit #10 and motor assembly. The hole
needed to be reamed from 11,188–11,283'. The well was drilled 139' rotating with one 23' slide.
The bottoms-up circulation show gas and oil.
Day 63 was spent drilling 36' and then tripping out of hole at 12,381' for a MWD failure. At
surface, bit #10 (tricone) was graded as worn. The bit was replaced with bit #11 and run in
hole. The bottom-hole temperature was recorded at 238°F.
Day 64 was spent drilling an additional 189' and then tripping out of hole at 12,537' for a bit
change to bit #12. There was a slight increase in bottom-hole temperature from 238°F to 250°F,
and some oil and gas was observed on bottoms-up circulation.
Day 65 was spent finishing the trip in the hole with bit #12 and drilling 160'. The bottom-hole
temperature was 250°F and a small increase in bottoms-up gas was observed. Finally, Day 66
was spent drilling to TD at 12,789' (survey depth). Drill breaks were observed at 12,727–
12,730'. The final survey was at a measured depth of 12,789’, TVD of 10,513’, azimuth of 297°,
and inclination of 88°.

Synopsis of Petroleum Indicators in the Monterey Formation
Appendix D
Temblor Petroleum Castillo 2-19
The Castillo 2-19 well was drilled within abundant siliceous rocks which are potential reservoirs
and hydrocarbon source rocks. Mud logging commenced from 3561’. Chromatography showed
the expected presence of trace heavy gases within the Sisquoc Formation. Other oil indicators
were present in trace amounts by 9550’. Oil shows increased in the Monterey Formation and
are present continuously to Total Depth of 12,789’. Mud logged indicators suggest good
potential for Monterey Formation oil production, however there is no prior history of under-
pressured Managed Pressure Drilling method in Monterey.
Mechanics and Technology

Down to 10,261’ the well was mud logged in a conventional manner. Cuttings samples were
recovered from the shaker screens. Gas was drawn from an agitator gas trap in the flow line.
From 10,261’ to TD the well was drilled with managed pressure drilling (MPD) in an under-
pressured condition. Cuttings sampling was problematic with the apparatus used. Returns from
the wellbore traveled through an entirely closed flow line into a large tank. Some
experimentation was needed to determine the best source for solid samples. Usually but not
always the best samples were recovered from a 3” dump valve on the bottom of the tank,
closest to the flow line input. Quality of sampling was construed from these factors: apparent
freshness, i.e., cuttings newly entering the tank; recovery of actual solids as opposed to fluid
only; and the size and quantity (enough to examine) of solids.
Gas sampling was accomplished by connecting tubing into a ¼-inch valve on top of the tank. A
vacuum was drawn on this tubing, as is customary in conventional mud logging drawing from a
gas trap placed in the fluid stream returning from the wellbore. A pressure regulator at the valve
prevented aberration from a continual, controlled gas sample stream. Consistency is essential
for relative gas measurements.
Depth lagging was computed from fluid pumped, but the air input to create an underbalance
was only averaged, thus making lagging less precise than usual. Nevertheless, as the well
progressed the evidence of returning gas and samples suggested fairly accurate lagging, and
variations implied that the cuttings were representative of the intervals drilled.
Samples were examined with a binocular microscope at 10 to 35 power. Gas was analyzed by
a Shimadzu chromatograph equipped with dual Flame Ionization Detectors. Chromatography
was quantified by integration. Gas “units” are scaled at 200 ppm methane equivalence. It is
worth noting that in some regions the local custom is to scale units at 100 ppm CH4; double the
gas unit values reported here to relate them to gas readings in other regions.

Appendix D
Lithology and Hydrocarbon Shows

Above 10,261 ft
The basal Sisquoc contains increasing laminated clay-rocks and biogenic rocks. Claystone, the
dominant rock in Sisquoc, grades to shale with improved induration and fissility. By 9900’ MD,
shale is the dominant rock type. Dolostone beds also gradually increase in frequency and
amount, usually present only as traces but occasionally up to 20%. The Monterey shale is
distinguished from Sisquoc by a slightly browner color tone and some flaggy cuttings habit in
addition to the fissility and induration.
The first significant show and the first significant chert occurred at 10,195’. A significant fracture
occurred at 10,237’. The clay rocks become virtually all shale, much of which is very siliceous
and brittle, instead of claystone, with accompanying dolostone and argillaceous chert.
The fracture at 10,237’ yielded 400 units of ditch gas, from a consistent background of 20 to 30
units, with a rich mixture of methane through pentanes. Live oil pops with moderate gold
fluorescence accompanied the gas. The shale, chert, and dolostone are uniformly fluorescent.
A trace of drusy calcite gave a fast streaming light yellow cut fluorescence. This is an
extraordinarily good oil show for Monterey rocks drilled with 11.8+ ppg drilling mud. Clearly, a
good fracture, possibly a fault, was encountered.
A general lack of oil stains on cuttings, and lack of heavy oil blebs, on the Monterey rocks in this
well is not necessarily negative regarding the oil indicators. In fact, based on the other
indicators and gas values the oil that may be moveable in the Monterey in this well is probably
relatively higher gravity, and does not leave the heavier, more residual traces characteristic of
many lower-gravity Monterey producers.
10,261’ to 10,820’:
Below 10,261’ there was initial difficulty recovering a sufficient sample to examine due to drilling
with a 6⅛” PDC bit with a mud motor. Fast drill rates exacerbated the problem. The rocks may
have been further pulverized by traveling under pressure through the long surface flow line with
multiple elbows. The samples in the early part of the MPD were only marginally reliable – the
solids were extremely small, making especially chert harder to detect. The log shows primarily
siliceous shale with only minor amounts of chert and dolostone, never more than 10% chert and
20% dolostone. It is possible that chert and dolostone were more abundant, but less evident in
the samples due to the very small size of pieces. The faster than usual drill rate would tend to
suggest low content of chert and dolostone.
Oil shows and gas values were very good in the first part of the MPD section, though
measurements were intermittent due to sporadic unloading of the wellbore. Fluorescent oil
pops, light brown microscopic oil blebs in white light, and oil iridescence were noted. There is
abundant cuttings sample fluorescence. Ditch gas was often several hundred units, and
reached as high as 1500 units. These are excellent show indicators by the standards of normal
Monterey sections drilled with mud.

Appendix D
10,820’ to 11,940’:
Shows and gas decreased just below 10,820’. This is also the point where distinctive smectite
tuff with bright mineral fluorescence becomes more prominent (traces occur at least as high as
10,370’). Chert further decreased to traces only below 10,800’, until occasionally reaching up to
10% below 11,430’. Dolostone persists in small quantities, and there is one interval from
11,275’ to 11,300’ where dolostone peaks at 40% of the sample. Small amounts of very fine
sand and sandstone are present.
Ditch gas was low throughout this interval except for occasional episodic gas spikes when the
amount of water relative to injected air fluctuated. Three bit trips in this interval resulted in 2900,
1300, and 1000 units trip gas and a film of oily emulsion and free dark golden brown oil.
11,940’ to 12,789’:
Small amounts of chert occur beyond 11,420’ and chert becomes common to abundant from
11,940’ to T.D. Dolostone also becomes abundant in this section. Each of these rock types
comprises up to 40% of the lithology, the remainder being hard brittle siliceous shale, and traces
of sand. Oil shows increased again in this interval. Oil attributes include iridescence,
fluorescent oil pops, and gold fluorescent background oil in the drill fluid. Samples display
uniform dull gold fluorescence and weak to strong solvent cuts.
Ditch gas continued to be affected by sporadic air injection rates. Gas spikes were common,
some of which did not appear to be related to air/water fluctuations. As before, the heavy gas
components of pentanes and butanes were richly abundant.
Four trips occurred in this interval, with trip gas values of 3200, 3500, 2100, and 1600 units.
These are exceptionally high values for trip gas within the Monterey Formation. Oil slicks and
oily film were seen after each trip. Following the trip at 12,193’ dark brown to black free oil
constituted up to 20% of the returning fluid.
This interval contains elements normally associated with good mud-log shows and oil
producibility in the Monterey Formation: silicic and biogenic rocks; variation of rock types in
close proximity; oil indicators such as sample fluorescence and solvent cuts on the rocks; oil
indicators such as pops, visible free oil and iridescence on/in the drilling fluid; high ditch gas
values; and favorable gas component proportions.
There are at least three notable fractures in the last 100’ – at 12,689’, 12,727’, and 12,746’.
These were marked by much faster drill rates, ditch gas increases that were not attributable to
the air/water injection fluctuations, and gold fluorescent live oil pops. An oil slick formed on the
fluid pits from returned fluid.
Chert and dolostone are much more abundant in this interval than in the previous sections.
Drilling rates were substantially slower, too. This may be in part due to the extended lateral hole
geometry or the use of insert bits rather than PDC bits, but the more obvious likely factor is the
harder rock types as seen in the samples in this last interval. The evidence suggests that the
most chert-rich, high resistivity part of the Monterey was not penetrated until this last interval.

Appendix D
Summary
Castillo 2-19 contains biogenic-rich reservoir quality lithology, especially chert and including
dolostone and brittle siliceous shale, in the intervals 10,195’ to 10,820’ and 11,940’ to 12,789’.
Oil shows were good. Gas shows were outstanding, though the effects of MPD on the gas
values are not clear. The cumulative amount of fracturing in formation along the wellbore is not
clear from mud-logged evidence. The best evidence for optimal reservoir quality lithology was
not seen until the last several hundred feet of the well.

Appendix D

Technical Progress Report: September 30, 2003 To September 29, 2004

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Use of Cutting-Edge Horizontal and

Underbalanced Drilling Technologies and

George Witter (Temblor Petroleum Company)

Temblor Petroleum Company, LLC

Maurer Technology Inc.

DE-FC26-03NT15426 - ii - Temblor Petroleum Comp.

DE-FC26-03NT15426 - iii - Temblor Petroleum Comp.

Appendix A: Notes from Project Team Meetings in Bakersfield

Appendix B: Drilling Program for Castillo, Ross and Howe 2-19

Appendix C: Daily Drilling Diary and Operational Comments

Appendix D: Synopsis of Petroleum Indicators in the Monterey Formation

DE-FC26-03NT15426 - iv - Temblor Petroleum Comp.

DE-FC26-03NT15426 -v- Temblor Petroleum Comp.

DE-FC26-03NT15426 -1- Temblor Petroleum Comp.

Figure 2. Outcrop of Fractures near Drilling Location

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Figure 3. Surface and Bottomhole Location of Original Well

1.2 Objectives of Demonstration Well

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Figure 4. Application Objective

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3. A new high-pressure-rated 10¾/7-in. surface liner design allowing for placement of a

1.3 Project Team

A multi-disciplined project team was assembled comprising several consultants, consulting

DE-FC26-03NT15426 -5- Temblor Petroleum Comp.

DE-FC26-03NT15426 -6- Temblor Petroleum Comp.

DE-FC26-03NT15426 -7- Temblor Petroleum Comp.

Hydrocarbon observations, cuttings analysis and gamma-ray response indicated additional

Figure 5. Plan (blue) and Actual (red) Well Paths

DE-FC26-03NT15426 -8- Temblor Petroleum Comp.

Figure 6. Plan and Actual Time/Depth Curves

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3.1 Task Statement

Task 1 – Technical Meeting

Task 2 – Redrill and Complete the Primary Project Well

Task 2.1 – Plug Back the Well to be Redrilled

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Task 2.4 – Drill Horizontally and Underbalanced 1000 ft in a Northwesterly

Task 3 – Produce and Test Primary Project Well

End of Budget Period l / Decision Point.

Task 4 – Conduct and Analyze VSP Survey

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3.2 Drilling Objectives

Other issues pursued by the project included:

¾ Successful application of PDC bits in the shale sections

¾ Improvement seen in penetration rate delivered by MPD drilling methods

Each of these topics is discussed below and in Section 4.

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1. Stabilize the shale

4. Control corrosion on the drill pipe and casing

3.4 MPD Operations

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6⅛” Open Hole

Figure 8. Slave-String Fluid Paths

This system was employed to:

4. Allow EWD observations of hydrocarbons while drilling

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4.1 Summary of Progress by Task