Weekly News Week of Apr 1-Apr 29, 2003

All in all April was a great month, but would have been better if the bottom hadn't fell out of oil prices at the end of the month.  The crash of oil prices another $5-6 per BBL and the threat of further collapse has got me scared.  We are not in the same position we were during the last cycles of low prices.  Production decline is very evident, and overhead is up.  Without a major restructuring of property, equipment, and lifestyle, we could not weather a round of less than $20 oil prices.  I was just catching up and starting to feel better about things mid-April, thinking that if the $25 oil would hold we would be okay.  Now I don't know where we stand.

The programming of the parallel port software for the new laptops and the Sercel 338B progressed nicely.  I did my final integration of the 2.4 Ghz laptop with the parallel port interface and tripled data transfer rates and programmed the automatic Demux of the record.  I was pleasantly surprised to find the time required to Demux the record is negligible. Thus data transfer from the Sercel 338B to Demux and display for examination is slated to take less than one minute, depending how fast I am with the buttons.  I am starting the arduous process of learning Windows programming for graphics as this is the final key for quick evaluation of shot records in the field.  My mind is  going 100 MPH as I can think of all the QC possibilities the speed of 2.4 Ghz will give me in the field.

I also started firing up the Opseis 5586 3-D recorder, with two possible ends, one to use it for ourselves, secondly to possibly rent it out to a third party.  I will have a limited budget, but there is a learning curve also to be climbed.  If I am to endure another round of low oil prices, I need low cost brain projects to help me pass the time while the budgets are so strained as to allow no frills.

I prevailed with the OCC to get them to drop charges on the three contended wells, and they reduced the action to an "administrative fee" of $500.  No court, no lawyers.  I have one more outstanding well to M.I.T.  The Brown W-3 is the last well of a long list to fix and test.  However it's location of being right on the fence line of State Highway 10, make it one of the worst.  I have been dreading it for months.  Unfortunately the OCC UIC department is acting more like the EPA, requiring reports and then using the reports you file against you for prosecution.  Also they are showing trends of retro-active filings, so that current compliance is no longer protection for previous exceptions.  If I can get through this round of scrutiny, I certainly plan to try to stay a step ahead of thee OCC.  However I have to feel good about our efforts in the past year to solve the problems on 22 of 23 wells.  I thought this could kill the company by itself.  Although it certainly tried, it did not succeed as of today.

It is frustrating to be so cash-strapped.  I am in a one man war with life.  My friend of comfortable oil prices is also getting ready to leave me.  Most of the time I have to proceed ahead without knowing how things are really going to turn out.  Today I have that feeling in spades.  Other times in the past I have made it through psychologically by concentrating on intellectual property.  So that when the smoke clears, and it has so far, that we have new opportunities before us as a result.  A good time to develop software, tune up geophysics, develop prospects and so forth.

Cindy is not doing so well on the Glevec miracle pill.  It is not delivering the promised results, of keeping the Leukemia in check while allowing a normal life without side effects.  The Leukemia is in check but her normal life is threatened.  In our current situation she must work full time to keep her insurance, just the pills are $30,000/year, let alone all the blood work and doctors visits.  Without insurance, our lives would have to change NOW.  In our wonderful country of free-enterprise medicine, and insurance companies who only want to insure the healthy, those who are just about poor are in a tough spot.  It seems to be boiling down to the need to go ahead with the bone marrow transplant some time this year.  The cure looks good, 20 more years on Glevec, seems miserable and desperate.

After weighing the options it looks more and more like I will go ahead and form an LLC for the express purpose of providing Farm-in funds to Gateway.  The limited liability and the ability to pass tax incentives through to investors give compelling reasons to use it as the financial vehicle of choice to provide close-in funding to Gateway to pursue various projects.  LLC partners can also be foreign tax entities, thus opening the door for willing Canadians to make direct investment in US oil and gas properties, without creating too big of tax nightmare.  Should our farm-outs to the LLC be successful, the LLC partners would benefit wildly and our equity value and cash flow for Gateway would increase without dilution of ownership.

The coal gas play of NE Oklahoma has become a compelling opportunity to pursue on our existing lands.  We have major players like Devon-Phillips in the area, as well as the local operators drilling new wells as fast as they can afford.  It is time to stop looking over the fence at my neighbors and get in and take a swing at it on our own terms.

 At least for today I have fixed most of our financial troubles, the immediate crisis is past, and for a few weeks will enjoy the ability to fix a few things.  What the next 4 weeks will bring, who knows?  Thank you for your support, for those brave enough to read these words.