Current News Period of Aug 12, 2004 to 12 Oct 2005

Needless to say, I have been on the go for over a year and little time to stop and summarize my activities.  I have a little more time now because we have hired more people and in theory I am supposed to have less work to do, but in reality I am busy as ever.  Gross receipts are higher than ever, but because we have been so active on doing projects and adding people, we have not been retaining as much cash.  The work force is fluid in NE Oklahoma and so I am letting attrition take its toll and get the overhead back into proper scale with the income.  We have already lost one employee in September and one more is getting ready to leave to start his own well pulling business.  So the forecast for me is more hands on work, and will return to pulling unit operating soon.

However it was a surreal experience for me to be left behind last May and watch the pulling unit drive off into the dust, as I turned well pulling over to my nephew, Dale Hanks.  He, my daughter, Sarah, John Gallie, and Glen Cumings another high school student took care of well pulling this past summer and over the course of the summer pulled nearly every active well we have and restored all to production.  In August I advertised for help and ended up hiring two more employees, David Henderson and James Billingsley.  David's bonus was that he could weld, and between he and Dale we caught up the backlog of welding projects at the shop before David quit in September to take another job.  James was trained to check wells and is currently helping to check wells and being a pulling unit helper.  When Dale leaves, I will take over well pulling again, and if James stays, I will have a well-checker-pulling unit helper and we will carry on in much the same fashion as I ran the company in the mid to late 1990s.  Personally I was shocked to see overhead and other expenses increase to $35,000/month in August up from $17,000/month in April.  With income on a good month running just over $40,000, I could see I had a real problem.  There was no tolerance for mistakes or a price bump on oil.  Let alone I could see there was going to be no money for special projects, like drilling a well or fixing up leases.  In dismay, even with a $64/BBL oil price, I realized that I had been making more money without the extra help and 200 BBLS/Month less production.

Not to be too concerned as I am the best well checker and the best well puller for the company.  I have proven over and over again that in the end employees just don't get it, and I end up spending a great deal of my time telling them what to do and fixing their mistakes.  And we have had some whoppers this summer where we have lost multiple man weeks of time due to carelessness, poor judgment and the like.  And so I plan to retract the size of our workforce back to a level that can generate the expected profits, and handle a sufficient number of special projects to move the company forward.  Once this is done, I will be feeling good again about our cash flow and with good oil prices as our ally can move the company ahead as I have done for the past 15 years.

The biggest project on the horizon is the drilling of a Khan #3 well.  We have shot sufficient seismic to identify the highest spot possible on the 320 acres on the south side of the road, and will drill the well in hopes to find commercial hydrocarbons and retain the lease.  Financially this will be a tight move, but as long as I don't get in too big of hurry, can pull it off this fall.  I must admit though, I once again find myself rolling those dice, and placing the bet.  I've done all the geo-technical preparation possible and hope to be rewarded by drilling our first well on a definable structure with 3 potential oil zones, 4 potential gas zones, and 5 potential coals.  The Khan #3 will be the first well we will drill without having to sell stock and the first well drilled on a seismic structural nose.

I have leased a new lease for exploration purposes, the Davis Lease, this 215 acre parcel, has potential for structure and stratagraphic traps in the Bartlesville.  We plan to shoot seismic soon.   We have shot seismic occasionally over the past couple of years, I hope do do more, more often.

The biggest challenge for me right now is to take advantage of the better oil prices and try to grow the company in ways we could not previously do..  We still have many existing wells to work on and new projects to take on that are waiting in the the wings to hopefully double our production in the next two years.  It will be a constant balancing act between bringing in the cash and spending it judiciously.