EPM has evaluated and successfully applied an existing technology that targets reservoirs consisting of a moderately heavy oil column floating on water. These types of reservoirs typically have low recovery due to the higher relative permeability of the rock to water compared to oil, particularly heavier oil, thus oil wells tend to “water out” early. The completion technology applied by EPM preferentially produces the 20 gravity oil and allows additional recovery. EPM believes that there are many opportunities to apply this technology along the Texas Gulf Coast in relatively shallow mature or abandoned oil fields, and is pursuing the first of these opportunities in its Neptune project in south Texas.

In addition, EPM has developed a proprietary artificial lift technology that targets residual oil and gas reserves in horizontal wells. We are installing our first field test in a well that we own 100% in the Giddings Field. If successful, we believe that there are substantial opportunities to apply this technology throughout the Giddings Field and in any other horizontally developed field where production is constrained due to liquid loading.

These technologies are experimental and may not prove useful to our plans for increasing production or ultimate recoveries from known reservoirs. None of our active projects depend on the success of these technologies.