Historical Data Highlights of currently targeted sections in McClain County, Oklahoma:

Total BOE                                                                      550,221,750

Wells Drilled                                                                   4,575

Dry Holes                                                                       33

Completion %/(Geological Success)                                 92.7%

BOE Completion                                                             129,708

Avg. IP                                                                           146 BOPD

To date Swan Energy has drilled 17 wells in the Golden Trend, out of which 17 have found oil and/or natural gas: 12 wells are producing, and 4 close to completion.

“I am excited to announce the continuation of our latest exploration efforts in the Golden Trend of Oklahoma.  It is a 3-well project that will target the Bromide formations with back up zones in the Hunton, Viola and Deese Sands,” says CEO of Swan Energy Brandon Davis.

The Three Queens Joint Venture will drill three wells in the exploration area, starting with an offset to two of the better wells Swan Energy Inc. has drilled in McClain County, Oklahoma.   The first well being offset has already made 50,000 BOE out of the 1^st Bromide, and has significant reserves in the Hunton, Viola and Hart Formations to be tapped.  The second well offsets a well that has made 12,000 BOE in the last 90 days from the Hunton/Viola formations.

“The Three Queen JV is getting an opportunity offset to wells we have already drilled and had success with.  Moreover Joint Venture partners have the opportunity to come on board with Swan Energy and our operator who combined have drilled over 35 wells in the immediate area, and have over a dozen more wells to be drilled by the years end.   This is a chance to participate with the leaders of exploration in McClain County, OK,” said John S. Herring, Director of Exploration, Swan Energy Inc.

That all changed in 2009 when the first Niobrara shale horizontal well (famously known as the Jake) was drilled and produced 50,000 barrels of oil in the first 90 days.   A year later the Jake well is still producing more then 2,500 barrels of oil per month.  In 2010 Swan Energy noted that, using the Jake well as a model, several other companies drilled comparably performing wells in the Niobrara shale using horizontal drilling and fracking techniques.

Two years ago the oil rush began in Colorado.  The Wattenberg is not considered the largest oil field in terms of acreage but it is what we at Swan Energy call “oil dense”.  It is two to four times more “oil dense” than the Bakken field (based on 25 -40 OOIP MMBEO/Section for the Wattenburg).

It is estimated that the Wattenberg field can produce 55 Million Barrels of Oil Equivalent per year in the Niobrara shale formation.

The Wattenberg oil and gas field is 20 miles north of the Swan Energy Inc corporate headquarters in Colorado.

The Niobrara shale formation is about 6,800 – 7,200 feet deep with an average thickness of 400 feet. However, the northwest portion of the Wattenberg field can be as much as 1,400 feet thick.  With recent advances in horizontal drilling and hydraulic fracturing the Niobrara shale found in the Wattenberg field is quickly becoming one of the hot oil plays of the west.

Public companies like Anadarko, Chesapeake, Noble Energy, Devon and ConocoPhillips are grabbing as many mineral and land leases as possible.   These companies are going after the estimated 55 million barrels of oil equivalent per year sitting untapped in the Wattenberg field found in the Niobrara formation.  The Barrels of Oil Equivalent (BOE) per year expectation and the increased ability to extract the oil quickly through horizontal drilling and fracturing has created an oil race that Colorado has never seen before.

High oil prices have created even more urgency.  Horizontal fracturing wells make sense to drill while oil prices are high.  The cost of one well is between 4 to 5 million dollars.  Oil companies are willing to take this risk because they know, based on the results from the development testing wells they drilled in 2010 and 2011, that they will hit oil and will see a 30% increase in both initial production (IP) and one year cumulatives over vertical wells.

Anadarko is projecting a payout in 10 months on a typical horizontal well drilled in the Wattenberg field.  These factors explain why public oil companies are racing to get as many land and mineral leases as possible. They have an aggressive drilling schedule of 10 to 12 wells per month because they are projecting a much larger production in a shorter time span when compared to typical vertical well projects.

Any investor looking to invest in the oil and gas sector should keep an eye on the Wattenberg oil and gas field.   Most of the companies that are drilling here are seeing well averages triple their Expected Ultimate Recovery (EUR) revenue production levels in the last several months.

In 2009, when horizontal drilling and fracturing started in this field, the Wattenberg saw at least a 20% year-on-year growth rate in Barrels of Oil Equivalent (BOE) since the wells have come online.

Brandon Davis of Swan Energy Inc thinks there are several factors that make Wattenberg a very advantageous and conservative oil play:

• High-quality, liquids-rich reservoir
• Strong proven well performance
• High hydrocarbon saturations per acre (2 to 4x over the Bakken)
• Large continuous reservoirs
• Horizontal drilling and fracturing ability to tap into reservoirs that are 12 times larger then the vertical wells in the same area.
• High Barrels of Oil Equivalent per Day (BOED) production numbers
• Short 10 day drilling schedules.
• Quick payout points based on EUR range of 300,000 – 600,000 BOE per well.
• With only a few dozen horizontal wells starting to produce in the 3^rd Quarter of 2011, the Wattenberg field still was able to set a new record for quarterly sales volume for horizontal wells of 72,400 BOEPD – that’s a 22% increase over 3^rd quarter 2010.

With the modern horizontal drilling and fracturing techniques and short Expected Ultimate Recovery curves, Wattenberg has been proven to be a very conservative oil move for investors and companies that are drilling here.

Considering high oil prices, the pressure cooker that is heating up in Iran and the Middle East, the discovery of this oil field could not have come at a better time for the United States.  In 2012, the Wattenberg oil and gas field will play an important role in decreasing our dependence on foreign oil while increasing domestic jobs.   With the Wattenberg field in Swan Energy’s backyard you can rest assured that we will be looking at this tremendous opportunity.

Horizontal drilling starts off with a vertical well bore. When the bore gets near the target formation the drilling string then makes a 90-degree turn so that the well bore runs parallel to the target formation. Because of the flexibility in the drilling pipe at these lengths the drill string can be snaked through the target formation.

To learn more about horizontal drilling and fracturing go to: http://www.swanenergymedia.com/HZ

In the Wattenberg field the average horizontal well is 7,000 feet deep and then runs 4,000 feet horizontally according to Swan Energy.

These horizontal wells have a significant advantage over vertical wells. In some cases a 4,000 foot horizontal well bore can have as many as 16 perforations  resulting in extracting more oil in a shorter timespan throughout the target formation.

The modern technique of combining fracturing with horizontal drilling has opened up new discoveries throughout the continental United States — Eagleford, Bakken, and the recent discovery of the Wattenberg field. As with the Wattenberg, most of these hot new oil plays that we hear so much about have been known for decades.   It is only now with high oil prices and this new technology of horizontal drilling and hydraulic fracking that makes these fields significant oil plays.

This kind of drilling not only opens up new oil and gas fields, but it also gives the ability to have several wells drilled from one drilling pad site location. For example, Swan Energy estimates that on 1288-acre parcel of land it may be possible to drill 32 vertical wells. One horizontal multi-well pad site with horizontal wells could effectively extract as much oil and gas from the 1288 acre of land as the 32 vertical wells. For Brandon Davis and Swan Energy this significantly reduces cost, and has much less environmental impact on the surface.

To learn more about horizontal drilling and fracturing go to: http://www.swanenergymedia.com/HZ

To learn more about horizontal drilling and fracturing go to: http://www.swanenergymedia.com/HZ

The pipeline will provide jobs to the region and add to the ability to transfer larger volumes of crude oil from the Oklahoma oil fields to market. Production is expected to begin in this summer. For more information on this new pipeline development and construction, please read it here and here as well.

During the month of January, Swan Energy has set a goal of drilling 3 wells of the 22 wells it plans to drill this year. The Boo 1-9 is the 2nd well for the month of January. The first well was Moore 1-9. The Boo 1-9 oil project is a Three Tier Joint Venture well.

Click here for a full drilling update video from Swan Energy.

John Schiffner and Swan Energy raise another derrick, called Moore 1-9 this January, 2012 as Swan Energy Inc continues to explore and produce domestic energy opportunities in the United States.

This time-lapse video shot this month showcases the process and production involved with raising a derrick prior to drilling on this site.

The first factor is called API gravity.  API stands for American Petroleum Institute.  This is a statics that is used to measure how heavy or light petroleum liquid is   compared to water. If the API gravity is less then 10, it is heavier than water and sinks; if the API gravity is greater the 10 then its lighter than water and floats above water.  API is measured in “degrees”.  Most petroleum values fall between 10 and 70 API gravity degrees.

Generally oil with an API gravity between 40 and 45 commands the highest prices.   Oil that has an API above 45 degrees is less valuable to refine because of the changes to the molecular structure.

The API gravity from the oil that Swan Energy (http://swanenergyinc.com) is currently pulling out of its wells in Oklahoma is about 38.00 to 42.00 degrees.

There are three main classifications of oil based on API Gravity:

• Light crude oil: API gravity greater then 31.1 degrees
• Medium crude oil: API gravity between 22.3 and 31.1
• Heavy crude oil: API gravity less then 22.3
• Extra heavy crude oil: API gravity below 10.00

There may be some differences in grading from party to party, but this will give you a good baseline to conceptualize the grades of oil.

The second factor is how sweet or sour oil may be.   This is based on the sulfur content of the petroleum.  Petroleum is considered “sweet” if it contains less then 0.5% sulfur.  “Sour” oil refers to petroleum contains more then 0.5% sulfur.

The term “sweet” comes from the nineteenth century prospectors that would taste small amounts of the oil to determine its quality – the low level of sulfur provides the oil with a mildly sweet taste and pleasant smell.

Sour oil is much more widespread than sweet oil.  Sour oil is found in Canada, the Gulf of Mexico, parts of South America as well as most of the Middle East.  Sweet crude is more commonly produced in the Central United States, most of Africa, the Asia Pacific and the North Sea.

Sweet crude is preferred because it takes less processing in order to remove impurities.  Light sweet crude has the highest demand while heavy sour crude is traded at a discount.  The oil that Swan Energy is currently getting out of Oklahoma is considered Light Sweet Crude.

Using these two factors, oil is then priced on the world market using the different types of oil.   There are two major benchmarks for world oil prices:  WTI crude oil and Brent crude oil.  While both are light sweet crude oils, historically WTI trades at a premium (by just a few dollars a barrel) because it is generally lighter and sweeter. Swan Energy sells the oil produced by the Joint Venture wells using the WTI index not the Brent index.

In 2010, for the first time, this changed and now WTI is trading below Brent by as much as 20%.

The variance between WTI and Brent began at the end of 2010 and was accentuated in February of 2011.  There are two main factors contributing to this.  First are the Libyan crisis and the Arab Spring, which decreased supply of light sweet crude to Europe.  The second, which may be more long term then the Libyan crisis, is the oversupply at the main storage facility in Cushing, Oklahoma.

As the new pipelines from Canada came online along with oil production increases in North Dakota and Colorado combined with  the two pipelines sending oil up from the Gulf resulted in the Midwest refiners being oversupplied with oil.   What also may be a factor is the oil coming from these areas may not comparable in quality to the light sweet crude oil from the Midwest.  These factors are all playing a part in creating a large delta between Brent and WTI.

There are some analysts that believe that market manipulation may be playing a factor as well.   The bottom line is that we will have to wait and see what happens as the crisis in Libya settles down and as more and more oil coming form Canada and North Dakota is being transported by truck and train to the Gulf.

Ultimately, demand remains high and while we may see short term increase in supply, oil supply is still diminishing world wide and this will continue to keep oil prices high – as evident by the increasing WTI prices as it closes the gap between Brent and WTI at the end of October and beginning of November.

However there was an oversight that should have played an important component to his job plan – American Energy.

American independent domestic oil and gas producers are the backbone of the energy industry.   These independent producers, like Swan Energy, develop 90% of the oil and gas wells in the United States.  These wells produce 68% of the oil and 82% of the natural gas in America.

As President Obama crisscrosses around the nation selling his job plan amidst the high unemployment and economic woes, the independent oil and gas producers are quietly contributing to the job growth.

According to the President of the Independent Petroleum Association of America (IPAA), in 2010 independent oil and gas companies (like Swan Energy) accounted for almost 4 million jobs. That’s an outstanding 3% of all jobs in the United States!

Instead of promoting this incredible job opportunity that only could strengthen our country’s policy and also decrease our reliance on the foreign oil, Obama’s plan puts its crosshairs the oil and gas industry by the mischaracterized  “tax loopholes” for the oil and natural gas companies by wanting to kill the historical tax structure that has promoted industry investing by independent producers and independent investors that are willing to take the high risk of oil exploration and production. These so-called “tax loopholes” have promoted American job growth for decades.

If we look at the industry as a whole, going beyond the independent oil and gas producers, America could see significant job growth.  According to William O’Keefe, CEO of the George C. Marshall Institute, “President Obama’s decision to omit traditional energy from his jobs plan conflicts with his own administration’s data.   Labor Department figures show that the oil and gas industry has been creating jobs as the economy has been losing them.”

Look at the chart below that was released by the U.S. Labor Department this year, since 2007 the U.S. has lost 5.7% of its jobs, while the oil and gas industry has gained 16.9%.  Swan Energy believes that with the oil and gas boom that we are seeing throughout the U.S. we could see significant job growth in 2012.   Job growth in the oil and gas sector increased about 200% in less then a year in 2011.  It is not unreasonable to infer that we could see this same trend next year.

What would happen to job growth if the hostility towards oil and gas exploration and production is reduced?

Swan Energy was astonished to discover from the IHS Global Insight-CERA findings that just a single year measure to increase the pace of federal permitting for oil and gas producers could generate:

• 230,000 American jobs
• Over $44 billion to the U.S. GDP
• Nearly $12 billion in federal and state tax and royalty revenues.

All of this without the $447 Billion price tag.

In the foreseeable future Swan Energy thinks that Americans are going to turn toward gas generation simply because gas factories will be less costly to assemble, less costly to run (at projected gas prices), and regulating approvals for new construction will be less complicated to obtain.

More power generators utilize gas for electrical energy, escalating the American need for natural gas. Engineering has enabled the drilling of natural gas from shale and various other formations found in large proportions throughout the U.S.

The exploration and development industry of gas and oil has improved operations and raised the size of American resources since 2006 by 39 percent, making the exploration and generation of natural gas more efficient, risk-free and ecologically favorable.

New oil and gas improvements in technologies include 3-D and 4-D seismic imaging, CO2 sand fracturing, coiled tubing, measurement-while-drilling (MWD), slimhole drilling, and hydraulic fracturing. 3-D and 4-D seismic imaging mixes seismic imaging techniques with personal computer processors to create either a three-dimensional or four-dimensional time model of the subsurface levels facilitating the recognition of deposits

One way that can help oil and natural gas to circulate more openly via larger cracks in the earth is to utilize a mixture of sand proppants and solution called CO2 sand fracturing.

Coiling tubing takes the place of the traditional rigid drill pipe with an elongated coiled pipe string that bends very easily to reduce oil-drilling costs. MWD systems assist in the collection of data from the bottom of a well during drilling and supply technical engineers and drilling teams with up-to-date data with regards to the dynamics of rock clusters. Drilling a slimmer hole in the ground to get to gas and oil deposits is referred to as slimhole drilling. Hydraulic fracturing is used to free natural gas caught in shale rock clusters and over 90 percent of U . S . gas wells utilize it to boost production. Colorado gas exploration pioneers utilize the environmentally friendly technique of drilling 15 or more wells from a single pad. This engineering decreases the traffic affiliated with pump trucks, proppant delivery and water removal along with improving upon the way that water is dealt with.

All these latest innovations in the oil and gas industry, along with the more challenging restrictions the EPA is leveling on coal plants predicts a bright future for nationally acquired and developed oil and natural gas; America’s need for a reliable energy source for the long term might have been discovered right under our feet.