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Gold/Mining/Energy : Tusk Energy (TKE)

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To: Michael M. Cubrilo who wrote (987)	11/4/1998 4:28:00 PM
From: grayhairs	Read Replies (3) of 1207

Hi Michael, I attended FST's 15 minute session. Here's what Squarek said about the Strachan reserves (Gross 100% working interest): Section 22 --> Proven = 13 BCF; Probable = 17 BCF; Total = 30 BCF These numbers include all zones so I interpret his numbers as 13 BCF proven in the Swan Hills and 17 BCF probable in the shallow zones, for section 22. Additional probable reserves of only 30 BCF (i.e. 1 section) are assigned by FST's independent engineers, whereas FST estimate between 90 and 110 BCF of additional probable reserves. FST value their 42.5% interest in the 100 Bcf of Strachan probable reserves at $12.8MM ($.60/mcf and risked at 50%). Squarek's bottomline was gross reserves of 120 to 140 BCF (in all zones) with 13 BCF proven today. Not nearly what I was expecting personally so I'll watch the followup drilling with considerable interest. Squarek gave a description of the geology of the Strachan Swan Hills play and he used the nearby Hanlon Swan Hills pool as an analog to illustrate where 2-22 falls on the Strachan structure and where they want to be with their next well. He showed how 2 early wells in the Hanlon pool missed the crest of the structure (as was the case with Strachan 2-22) and encountered pay only in the Swan Hills "platform". Those wells (6-31 and 6-1 of 47-17W5) have nonetheless produced 29.5 and 37.6 BCF respectively and still produce today at 3.7 and 5.8 MMCF/d, respectively. The Strachan 2-22 well may well be equivalent to those wells although the independent engineers won't yet assign reserves of that magnitude because of very limited test production (<50MMCF tested production with no evidence of free water or pressure depletion). A followup Hanlon well, drilled on the crest of that structure, was 6-29 and in 10 years it has produced 118 BCF. It still makes 31.4 MMCF/d by the way. That's what FST hopes to duplicate with their next deep test. Squarek illustrated the Strachan land position that they have assembled and showed a large "area of excellent Swan Hills potential" that covers a good portion of the initial 16-1/2 sections plus parts of the recently acquired lands. Kinda pie in the sky stuff but for those in the business we "understand" what he meant by what he said. He didn't say that it contains gas. He only said it has "good prospective potential to contain gas". FST expect to have Strachan sales gas of about 5 MMCF/d (gross) on stream in mid/late January. More deep and shallow drilling will follow by mid 1999. Squarek also talked (obviously only very briefly) about FST's Zeta and other exploration prospects and about their ongoing Kentucky program. He presented RISKED economics for each of FST's exploration plays and computed their combined value to be $57.5 MM ($2.39/share). That's about it from my notes and recall. Later, grayhairs

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