Southern San Joaquin Overview

Light Oil Exploration Targets

Overview

Salinas is targeting large structural and straligraphic traps in the oil prone, southern San Joaquin Basin.

The principal reservoirs are shelful and deepwater sandstones of Eocene to mainly Miocene age at depths between 8,000’ and 13,000’.

The deeper reservoirs (in many cases age equivalent to those in the genetically similar but smaller Salinas Basin) are characterised by moderate to good porosity, low to good permeability and containing medium to light oils (26º API – 40º  API).

Although average reservoir statistics are modest there are commonly core zones of enhanced reservoir associated with the axial part of the target sandstone deposits.  Oil wells drilled into these zones have often flowed at rates in excess of 2,000 bopd.

Salinas has acquired a number of projects covering over 30,000 acres in the Basin and has participated in the drilling of two deep wells.  Most significant is the North Yowlumne-1 which found light oil (32 º - 36º API) in a stratigraphic trap of a deepwater sandstone deposit consistent with the pre-drill interpretation.  Salinas has earned a 25% non-operated interest in that project and will be participating in the drilling of follow up well in the second half of 2007.

All Salinas’ projects are adjacent to large oil fields and the Company has expended considerable time and effort in building a large, regional database of wells and seismic.

This data, in particular thirteen 3D seismic surveys acquired by the Company is being evaluated to select new drilling targets.

The Company intends to exploit the flexibility inherent in the California mineral rights leasing system to continually turnover its San Joaquin projects, so activity and risk capital is directed at the best prospects attainable.

For example, the Windgap project was relinquished after the Company, as Operator, drilled the Windgap-1 to over 12,400’ then thoroughly tested the well but without producing hydrocarbons at commercial rates.  Although disappointing at the time, this prospect showcased the Company’s ability to the industry in California to carry out a challenging drilling program and meet its commitments in full.

Salinas has continued leasing in the area to expand its exploration holdings in the area and increase its register of drilling targets.