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Through recent workovers and production optimization activities in the field, Avalon and KROG have doubled production since the acquisition of the property in July, 2006.




New Diana Field - Upshur County, Texas

This property consists of thirteen wellbores in the New Diana field, which include six producing oil wells, three salt water disposal wells and four shut-in or marginally producing wells. The New Diana field is located in Upshur County, Texas, a short distance north of the City of Longview, Texas. The working interest was purchased from an Oklahoma City, Oklahoma, independent oil producer, who continues to own a working interest and is a partner in the property. The acquisition was effective as of November 15th, 2006. Avalon owns ten percent working interest in the property, and KROG Partners, LLC, a Kilgore, Texas based producer, is the operator. The units that make up this property include the King-Crow, S.T. Buie, Brannan, Stokely, J.B Winn, and the PB&IO RR.

These wells were originally drilled in the 1960's by various operators, and production and injection is in the Woodbine interval at approximately 3,500 feet depth. This property produces significant volumes of salt water, and as a result has a self contained salt water disposal (SWD) system. This results in a very low unit cost of salt water disposal, which is the key to successful enhancement of the property. These are mature wells with stable production, producing approximately 25 BOPD from the Woodbine.

KROG and Avalon have executed various facility enhancement and compliance projects that have resulted in the stabilization of previously erratic production levels, and are currently evaluating various workover or potential new drilling opportunities and addressing lease maintenance issues with the goal of at least doubling production from the property.

J.C. Kelly - Wood County, Texas

The J.C. Kelly #1 is a horizontal Paluxy well located in Wood County, Texas, and is currently shut-in pending a workover to address a casing leak. This well was originally drilling in the early 1990’s, and is operated by KROG Partners, LLC, a Kilgore Texas based operator. Avalon and KROG are currently considering workover options with the goal of re-establishing production from the Paluxy interval. Avalon owns a fifty percent working interest in this well.  


Janssen #1A - Karnes County, Texas

Avalon owns an undivided fifteen percent (15%) working interest in the Janssen #1A, Karnes County, Texas. The well was re-completed in the Roeder Sand (Wilcox Sand Series) in the existing vertical wellbore by a sidetrack drilling procedure at a depth of approximately 10,300 feet. The well was perforated with 6,000 feet of water fluid in the tubing. The well has been flowing at an average rate of 330 thousand cubic feet of gas per day and producing 10 to 20 barrels of high grade condensate. At present the well is flowing into the sales line without the need of a gas compressor.

The Janssen #1A has a gas sales contract that fluctuates monthly with the Houston Ship Channel price index and the liquid condensate will be sold at the monthly spot price for product in the regional Texas area. Avalon and the other participating partners received initial revenue distribution in July for the hydrocarbon products sold from the Janssen #1A well. This well should produce revenues for many years to come.

Total reserves are estimated to be 75,000 to 100,000 barrels of condensate and 3 to 4 BCF of Gas (billion cubic feet of gas). The well is located in an area that is very active in gas and oil production. There are several nearby wells that produce natural gas in excess of over 1 million cubic feet per day. Other working interest partners include Tradestar Resources (TSRR.PK), Hot Springs, AR, Bedford Energy (BFDE.PK) Oklahoma City, OK, and Penasco Petroleum, Austin TX). PROEX Energy Management (TSX: PXE) (PXEYF.PK) is the operator of the well.


Doris Hall & Fletcher - Grant Parish, Louisiana

The Grant Parish leasehold is comprised of the Doris Hall and Fletcher leases. The two leases produce from the 2nd Wilcox sand from 4,300 to 4,400 feet. This sand is very prolific containing oil and gas in commercial quantities. The leasehold has six wellbores. These wells were originally drilled in 1979 and produced in excess of 200 barrels of oil per day per well, and have been shut-in for several years. We have sold over 1,500 barrels of oil over the last six months.

The Doris Hall lease has three producing wellbores which are producing 12 BOPD. The Fletcher lease has two wellbores and one saltwater disposal well. The two Fletcher wells are producing 8 BOPD.

Avalon owns an undivided twenty five percent (25%) working interest in the Doris Hall and Fletcher leasehold. The Grant Parish properties are operated by DRG Energy, a Norman, Oklahoma independent operator..


Lake Washington Field - Plaquemines Parish, Louisiana

This property is comprised of three producing units currently making over 1,000 barrels of oil per day. Lake Washington Field is located Plaquemines Parish, Louisiana, about 60 miles south of New Orleans. Lake Washington was discovered in the 1930’s and is located around a shallow piercement salt feature. Since discovery almost 80 years ago, the field has produced approximately 350 million barrels of oil, putting it among the largest oil and gas fields in the United States.

Avalon acquired a 0.7% working interest in this property containing 3 producing units as well as like interests in surface production facilities and two salt water injection wells. Swift Energy Company (NYSE:SFY) is the operator of the field. Avalon will be evaluating additional drilling opportunities in the field next year.


Noble County, Oklahoma

This property consists of the Hughes #1 well and surrounding acreage. This well was originally drilled and completed in 1998 and tested 4 MMcf per day. Avalon owns an undivided 16% working interest in the property. The well is operated by DRG Energy, Inc. based in Norman, Oklahoma.

Following a successful workover by the operator, the well’s production has been steadily increasing and most recently was producing both oil and gas at a rate of 5 BOPD and 20 Mcf a day. It is currently producing in the Bartlesville Zone. Expectations are that production should continue to increase.


Nowata County, Oklahoma

This property was very recently acquired by Avalon. Avalon purchased a 10% working interest in the property. The lease contains several wells not currently in production as well as a salt water disposal well. Plans to bring the wells back into production are currently in the final evaluation phase. The operator anticipates commencing operations prior to year end.