Blugrass Energy’s property covers 2800 acres located within Eddy County, NM. The Cave Pool Unit is located within the prolific Artesia Vacuum Trend. More specifically within the Grayburg Jackson Pool. The Artesia Vacuum Trend play contains thirteen reservoirs with more than 1 MMBO cumulative production. Cumulative production from these 13 reservoirs was 796 MMBO as of 2000. Depths to the top of reservoirs range from 1290 to 4700 ft. This is a mature play, especially within the highly productive San Andres carbonates. Recent development of lower permeability Grayburg sandstones in the Grayburg Jackson reservoir during the mid-1990’s has been successful to the point of reversing production decline and is a major focus of current and future development.

Blugrass has a 100% working interest, currently there are 32 wells which currently producing approximately 12 BOPD with 30 MCF based on 40 acre spacing. There are over 100 possible drilling locations based upon 20 acre spacing. Management has currently identified 10 wells that are currently shut-in that will be returned to producing status within the first sixty days. Potential should exceed 20 BOPD. Water disposal is currently handled via the Cave Pool Units injection well which decreases water hauling costs thus increasing the economics of the Cave Pool Unit.

The Artesia Vacuum Trend consists of reservoirs of the Upper San Andres and Grayburg Platform, extending in an east-west direction from the city of Artesia, NM to the city of Hobbs, NM. The play contains 13 reservoirs with more than 1 million BOE of combined annual production. Cumulative production from the 13 reservoirs exceeds 800 million BOE. Production in most reservoirs is commingled from the San Andres and Grayburg Formations, with depths to the top of the reservoirs ranging from 1290 to 4700 ft.