Lexam Explorations - Oil & Gas Overview

Overview Lexam owns 75% of the oil and gas rights to the Luis Maria Baca Grant No. 4, a 100,000 acre parcel of land located approximately 185 miles southwest of Denver, Colorado. The 25% of the oil and gas rights not owned by Lexam are owned by a major oil company. Access to the property for the purposes of exploring and developing Lexam's mineral rights is guaranteed by the deeds to the property and by a paid-up, 20-year surface use agreement that was negotiated in 1992. Work on the Colorado oil and gas project began in 1992 with the discovery of oil in 28 shallow drill holes situated on the western flank of the Sangre de Cristo Mountains. Lexam was testing a gold exploration target and to everyone's surprise, found oil in an area where none was expected. The west side of the mountain range is also the eastern margin of the San Luis Basin. In 1992, geologists believed that no rocks favorable for producing hydrocarbons were present in the basin.	Click on image to enlarge

The discovery of oil was the first indication that conventional wisdom was about to be proven wrong. Independent tests confirmed that the oil was naturally occurring crude oil that came from Cretaceous age sedimentary rocks. Subsequent drilling and geological mapping found outcrops and subsurface occurrences of Mancos Shale, Dakota Sandstone and rocks of the Morrison Formation, precisely the rocks that would be expected to be present based on the results of the oil analyses. These same rock formations are prolific producers of oil and gas in much of the Rocky Mountain region. The hunt for oil and gas in the San Luis Basin was renewed.

Part of the northern Rio Grande rift, the San Luis Basin is one of a series of pull-apart basins that extend from central Colorado to southern New Mexico and eventually into Texas and northern Mexico. In addition to finding oil, Lexam's geologists learned that the eastern margin of the basin is a gently dipping fault zone that is characteristic of many rift type basins. This development was a key ingredient in showing that the basin is geologically similar to oil producing, extensional basins in Nevada and to a number of highly productive rift basins that have been discovered around the world. Cretaceous age sedimentary rocks that are favorable for generating and	Click on image to enlarge
producing oil and gas have been preserved in the eastern San Luis Basin, also known as the Baca graben. This is the area where Lexam has focused its oil & gas exploration efforts. Lexam's 60 miles of 2D seismic data, combined with proprietary and public-domain gravity and magnetic data, define the 550 mi² Crestone, sub-basin that is the deepest part of the Baca graben.Geologic mapping satellite and aerial photographic interpretations,published seismic data and well control have been used along with Lexam's seismic data to map the extent of sedimentary rocks that are favorable targets for oil and gas exploration.
In 1996, Lexam extended its initial seismic line an additional three miles to the west in order to explore the deepest parts of the Baca graben. Another 17 miles of 2D seismic data were acquired at the same time in ord er to fully explore the area around the Baca #1 and #2 wells. The new seismic data provided the first strong evidence for the presence of a widespread package of Cretaceous rocks in the Crestone sub-basin. The character of the seismic data is remarkably similar to the equivalent Pierre-Dakota-Morrison section located to the east in the Raton basin (Morel and Watkins, 1997) and the Mancos-Dakota-Morrison section located to the west in the San Juan Sag. The new data also allowed Lexam's geologists to map the distribution of favorable petroleum source, reservoir and sealing rocks in the Crestone sub-basin and begin to generate specific exploration targets.	Click on image to enlarge

The potential of the Baca Grant portion of the Crestone sub-basin is encouraging. Two types of structural traps, large closed structures and fault blocks, have been mapped from the seismic data. Lexam's primary exploration target is the 14,500 acre Crestone prospect, a large closed structure located in the northwest quadrant of the Luis Maria Baca Grant No. 4. The Pole Creek Prospect is a shallow oil target with potential for finding oil in a fault block near the margin of the basin. Additional structural/stratigraphic traps, located on the flank of the Crestone Prospect, are anticipated but lack sufficient seismic control at this time.	Click on image to enlarge
In addition, the potential for finding a basin-centered gas accumulation in the Crestone sub-basin is considered excellent. All of the surrounding basins that contain Cretaceous source and reservoir rocks at depths greater than 7,000 ft, produce large amounts of oil and gas from blanket, basin-centered accumulations of hydrocarbons (Morel and Watkins, 1997). The San Juan basin, for example, has produced more that 25 trillion cubic ft of gas. Based on Lexam's accumulated data, more than 100 mi² of the Crestone sub-basin contains a 2,000 - 3,000 ft thick package of Cretaceous sediments at depths ranging from 7,000 to 17,000 ft. The burial history of the Cretaceous section and modeling of the temperature gradient places the prolific source rocks of the Mancos Shale well within the oil/gas generation window (Morel and Watkins, 1997). Ultimately, the aerial extent of Cretaceous rocks within the Crestone sub-basin could be as much as 550 mi², making it an excellent target to explore for a significant basin-centered gas accumulation.