Drilling and Operations


KKM has successfully completed every well drilled to date. As of December 31, 2001, KKM had 36 productive wells in the Karakuduk Field, including 23 new wells and 13 re-completions of previously existing delineation wells. The 36 wells include 29 wells currently producing approximately 7,300 barrels of oil per day and 7, which are shut-in for various reasons, including the installation of additional gathering lines and well equipment and additional workover and stimulation operations. Another shut-in well is being considered for future use as an injection well for a pilot waterflood project.

KKM expects to renew its drilling program in the first half of 2003. Chaparral estimates up to 71 new wells will be required to fully develop the Karakuduk Field, of which 20 would eventually be converted into water injection wells. The planned development program includes a pressure maintenance operation that Chaparral’s management believes will enhance ultimate recovery.

Production Schedule

KKM’s daily oil production is currently being processed at a pilot facility and trucked to the KKM pump station adjacent to the export pipeline. The pump station is approximately 18 miles from the Karakuduk Field and was placed in service in April 2000. KKM has finished construction of an 18-mile pipeline, capable of transporting up to 16,000 barrels of oil per day to the export pipeline terminal. Test production was successfully delivered through the pipeline to the export pipeline pumping station in April 2002. KKM commissioned a crude oil pipeline from Karakuduk Field in June 2002, which is expected to reduce operating costs by approximately $100,000 per month. KKM will continue to truck oil production to the pump station at the export pipeline. Maximum crude oil trucking capacity has been approximately 8,500 barrels of oil per day. KKM also expects to commission its central processing unit by mid-2002, with further expansion through 2003 in order to improve its produced water processing capability in the field.

KKM completed a 3-D seismic study in early 2001, which continues to provide the optimal locations of wells (both producers and injectors) and further define the possible total productive capacity of the Karakuduk Field.

KKM is diversifying by acquiring several internet properties, such as this one, which demonstrate appeal to a wide range of market sectors.