In the second quarter of 2001, Strata Production Company drilled the first directional/horizontal well in the NDP (Sixth Annual). The NDP Well #36 extended 3690 ft with a bottomhole location in the NW/SW of Section 12 (Trajectory). Completion of three intervals of the toe zones (9786-9805 ft, 9464-9470 ft and 9123-9129 ft) occurred in the third quarter of 2001 (Seventh Annual). However, a rapid decline in production, recovery of crushed proppant, and analysis of a bottomhole pressure buidup test indicated that sand proppant crushed near the wellbore and that the toe zone was not effectively stimulated. In April 2002, the well was restimulated to clear the damaged proppant near the wellbore, create additional frac height, and place a high strength proppant to reestablish communication with the existing treatments.

During the workover, an additional promising zone in the horizontal section, designated the "H-2" zone, was completed from 6333-6349 ft (Seventh Annual). A bridge plug was set, and the "H-2" zone was put on production. As of December 31, 2002 the "H-2" zone continues to flow and had cumulative production of 55,407 BO, 130 MMCFG, and 11,082 BW with production rates of 130 BOPD, 596 MCFGD and 12 BWPD. When the "H-2" stops flowing, the retrievable bridge plug will be removed and production from the "H-2" zone and the toe zone will be commingled and tested.

NDP Well #33

In the fourth quarter of 2002, NDP Well #33 was drilled parallel to and approximately 200 ft southwest of NDP Well #36 (New Wells ). The well plan was modified to overcome the problems encountered with Well #36 (Seventh Annual). The initial completion of NDP Well #33 is in the toe of the well through 32 ft of open hole from 9573-9605 ft (Trajectory). The well was put on production in December 2002, and initial production rates are encouraging.