RANCHER ENERGY'S EOR STRATEGY

Enhanced Oil Recovery Overview

Enhanced oil recovery (EOR) methods play a key role in the Companys business strategy
determining how specialized technology and techniques can best recover an assets remaining
resources. Higher oil & gas prices and advances in technology such as 3-D seismic data and
directional drilling make historically productive assets an attractive source of potentially
recoverable oil & gas reserves.
The Company has acquired significant assets in the Powder River Basin, a commercially active,
hydrocarbon-rich region of Wyoming. For several of Rancher Energys projects, carbon dioxide
(CO2) flooding has been identified as the most suitable and cost-effective EOR solution. The
Company has recently signed an agreement with Anadarko Petroleum Corporation. to secure an
ongoing CO2 supply to our Wyoming fields.
Several types of recovery methods
are typically employed to move
hydrocarbons from the reservoir to
the wellPrimary, Secondary, and
Tertiary.
Primary Recovery is the initial
production phase of hydrocarbons
from a well, since it is the easiest
phase of getting oil & gas from the
formation to the surface due to the
presence of initial reservoir pressures.
When the maximum amount of oil & gas has been recovered by Primary Recovery methods,
Secondary Recovery methods may be instituted which consist of inducing an artificial drive into
the formation to replace the natural drive. The most common Secondary Recovery method is
waterflooding, which involves injecting water under pressure into the formation to drive the oil
& gas to the wellbore.
Following Secondary Recovery methods to recover hydrocarbons, a third approach, called
Tertiary Recovery, may be instituted. (The distinction between Secondary and Tertiary recovery
methods may actually be obscure--some Secondary Recovery methods are also considered as
Tertiary Recovery methods and vice versa). Tertiary Recovery involves the use of even more
enhanced hydrocarbon recovery methods to enable the oil & gas to be recovered from the
reservoir, such as the injection of gas, chemicals, microbes, or heat into the wellbore to modify
its fluid properties and thereby enhance the movement of hydrocarbons through the formation.

CO2 Injection
CO2 injection is among the newest forms of Tertiary Recovery and has been used very
successfully in hydrocarbon basins that exhibit a particular geologic and geophysical profile.
CO2 is a super-critical fluid which has the density of a liquid and the viscosity of a gas. Supercritical CO2 is easy to meter and pump. In most cases, CO2 is pumped at pressures of about
1500-2000 psi.
When CO2 is pumped into an oil reservoir at a pressure sufficient to make it as dense as the oil
in the reservoir, the CO2 may become miscible with the oil. The pressure at which miscibility is
first achieved is called the minimum miscibility pressure (MMP). At or above its MMP,
CO2 becomes an ideal solvent for oil, and because of this, it displaces oil from the reservoir
much more efficiently than water. It picks up lighter hydrocarbon components, swells the total
volume of oil, and reduces its viscosity so that it flows more easily.

Screening Criteria

Oil Characteristic Requirement

API Oil Gravity

> 25 degrees

Viscosity
< 10 cp
Depth

> 2500 ft

Residual Oil

> 25%

WMP
Achievable

Yes (determined empirically using laboratory slim tube

tests)

Other Positive
Factors

Good waterflood performance (good sweep efficiency,

reasonable throughput rates and good voidage balance)

Negative Factors Severe reservoir heterogeneity, adjacent loss zones (gas

caps), dominant fracture systems

Low gravity oil tends to have high MMPs. High viscosity oils have very unfavorable mobility
ratios.
The depth must be great enough for the reservoir rock to have a high enough fracture pressure to
contain the CO2 above the MMP. The higher the temperature, the higher the MMP. (If the depth
is great enough, a high temperature may not preclude miscible flooding). The residual oil must
be great enough so that there is a target for CO2 enhanced oil recovery.

Surface Facilities

US CO2 Plays

Commercial scale CO2 EOR began in 1972 in the Permian Basin. Anthropogenic CO2 was
recovered from gas plants in the Val Verde Basin and then pipelined to SACROC and North
Cross. During the 1970s the commerciality of CO2 EOR was established and set the stage for a
major expansion in the 1980s. The Permian Basin infrastructure was built. Underground sources
at McElmo Dome, Bravo Dome, and Sheep Mountain were developed. The major pipelines were
laid. During this decade the LaBarge and Rangely and Jackson Dome and the
Mississippi/Louisiana source and use fields were also brought on line. In the 1990s Great Plains
and Weybum started up. In the early 2000s Salt Creek began.
Today, there are over 80 CO2 EOR projects in existence in the United States, and more than
230,000 BOPD are being produced by CO2 injection. RANCHER ENERGY'S EOR
STRATEGY

International CO2 Plays

Internationally, CO2 injection projects have been conducted in Algeria, Canada, Hungary,
Russia, Trinidad & Tobago, and Turkey.

Greenhouse Gas Emissions Chart

Greenhouse gases, which include carbon dioxide, methane,
nitrous oxide, hydrofluoro-carbons (HFCs), perfluorocarbons
(PFCs,) and sulfur hexafuorides (SF6), absorb infrared energy
and prevent it from leaving the atmosphere. All greenhouse
gases are not created equal. If CO2 is taken as having an effect
of 1, methane has an effect 21 times that of CO2 and other
gases have an even greater effect. However, CO2 is probably
the largest source of anthropogenic greenhouse gases.