Palmetto Point (past project)

In February 2006, Delta Oil & Gas acquired a 10% gross working interest in a ten well drilling program located at Palmetto Point, Mississippi. The prospect wells are located in the Frio Geological formation. Frio wells typically enjoy low finding costs and have a high degree of success. The gas targets occur at shallower depths, and have minimal completion costs.

Phase 1: 12 Wells

Drilling of the first of ten wells (the “PP F-40″) commenced in the first week of May 2006 and all ten wells have been drilled, seven of which are producing, one of which is awaiting tie-in to the production infrastructure and two of which were not commercially viable and were plugged and abandoned.  We elected to participate in two additional wells at this same location, both of which contain reserves suitable for commercial production. These are waiting to be tied into a nearby pipeline.

The well results are set out below:

Well Start Complete Results Status
PP F-40 5/11/06 5/16/06 Frio Gas 2 zones Producing
PP F-118 5/18/06 5/22/06 Frio Gas Producing
PP F-121 5/24/06 5/29/06 Dry Abandoned
PP F-7 5/31/06 6/04/06 Dry Abandoned
PP F-39 6/10/06 6/16/06 Frio Gas/Oil Producing
PP F-42 6/18/06 6/21/06 Frio Gas/Oil Producing
PP F-36–2 6/23/06 7/02/06 Frio Gas Producing
PP F-4 10/31/06 11/05/06 Frio Gas Producing
PP F-29 11/11/06 11/14/06 Frio Gas 5 zones Producing
PP F-12 12/18/06 12/24/06 Frio Oil, 26 ft Waiting tie-in
PP F-6B 7/27/06 7/27/06 Frio Gas Waiting tie-in
PP F-52A 7/27/06 7/27/06 Frio Gas Waiting tie-in

Potential flow rates for the gas will not be known until shortly after the pipeline connections are complete and production is established.  These flow rates will be reported as soon as they are available.

Phase 2: Option of 50 Wells

During the fiscal quarter ended September 30, 2006, we entered into an agreement to acquire an interest in a drilling program comprising up to 50 wells. The area in which the proposed wells are to be drilled covers approximately 200,000 gross acres between Southwest Mississippi and Northeastern Louisiana. Drilling commenced the first week of September 2006. The site of the first 20 proposed wells are located within range to tie into existing pipeline infrastructure should the wells be suitable for commercial production.

The drilling program is conducted by Griffin & Griffin in its capacity as operator. Griffin has enjoyed a success rate of more than 70% on Frio formation wells in this region.

We have agreed to pay 10% of all prospect fees, mineral leases, surface leases, and drilling and completion costs to earn a net 8% share of all production zones to the base of a geological formation referred to as the Frio formation, and 7.5% of all production to the base of a geological formation referred to as the Wilcox formation.

To date, we have drilled seven wells of which two are producing, three are awaiting connection to the nearby pipeline for production, and two wer abandoned. The well results are set out below:

Well Start Complete Results Status
CMR 39–14 12/27/06 12/31/06 Frio Gas Producing
Dixon #1 1/03/07 1/19/07 Dry Abandoned
Faust #1 2/04/07 2/11/07 Frio Gas Producing
Buffalo River F24 2/19/07 2/23/07 Frio Gas Waiting tie-in
USA 37–1 Redbug #2 5/5/07 5/13/07 Frio Gas Waiting tie-in
Buffalo River F-33 5/20/07 5/25/07 Frio Gas Waiting tie-in
Randall #1 5/27/07 5/31/07 Dry Abandoned

We expect to drill sixteen additional wells over the summer. Initially, three wells will be drilled. Based on the results from these wells, the balance of the planned wells will be scheduled.

The Prospect

The Drilling Program is being conducted by Griffin & Griffin Exploration in its capacity as Operator. This consists of the drilling, logging, testing, completing and equipping for production (or if applicable, the plugging and abandonment) of ten wells. Griffin anticipates drilling to a subsurface depth equal to such depth as is necessary to penetrate the sands of the Frio Formation identified as potentially productive of oil and/or gas. Griffin has drilled, owned or operated more than 100 Frio wells in the region

Griffin has utilized seismic “bright spot” technology a technology providing a tool to identify gas reservoirs and to delineate the reservoir geometry and limits. Utilizing these critical factors has improved reserve estimates and the geologic success ratio that has made the Frio an economical and predictable reservoir.

The Frio in the area of Southwest Mississippi and North-Central Louisiana is a very complex series of sand representing marine transgressions and regression and therefore the presence of varying depositional environments. Structurally, the Frio gas accumulations are a function of local structure and/or structural nose formed as a result of differential compaction features. However, stratigraphic termination (i.e. up dip shales outs of sands) also plays a role in most Frio accumulations. The stratigraphy is so complex that seismic HCL evaluations are the only viable exploratory tool for the Frio prospect.

On April 3, 2009, the Company sold its Working Interest in the Mississippi project and the surrounding lands for $200,367 and $500 per month for 48 months of production.