Kodiak Oil (KOG)

During 2005 we participated in the drilling of six wells that evaluated the natural gas potential in the Almond and Ericson formations. Two of the three wells drilled in the Chicken Springs Unit were drilled vertically to test the only the Almond sands. One well in the Chicken Springs Unit was drilled horizontally to evaluate the gas potential of the Almond coals. In addition, we participated in two wells in the Chicken Ranch Unit and acreage contiguous to the Unit to evaluate the gas potential of both the Almond and Ericson sands

We believe the property has the potential for over 100 drilling locations based upon 160 acre spacing. However the spacing pattern could be downsized to 80 acre spacing and/or horizontal drilling technology could be utilized to

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exploit the potential reserves. Further drilling and/or completion activity in these areas have been discontinued until the second quarter of 2006 due to industry winter drilling stipulations particular to BLM leases.

During 2006 we intend to participate in the drilling of up to ten wells to test the Almond and the Ericson Formations. We will have both non-operated and operated wells and our share of drilling and completion costs for the wells is estimated at $8,000,000.

We own an interest in 12,873 gross acres within the Chicken Springs Coalbed Methane Gas (“CBM”) Unit, a 19,800 acre federal oil and gas CBM unit that was approved in July 2004. We have a 50% before payout (an approximate 40% after payout) working interest in the 12,873 gross acres. The initial exploratory test, CSFED 14100 SW 29, was drilled to a depth of 6,180 feet to evaluate the natural gas potential of the Almond sandstones and Almond coals during 2004.

The initial exploratory test encountered 24 feet of Almond coals and 114 feet of Almond sands, of which 94 feet showed gas indications. Completion work was completed in three stages. The first stage involved an injection test of the Almond coals in an effort to gain information on the permeability of the coals. The second and third stages included fracture stimulation procedures on the two primary Almond sand zones. A three-mile pipeline was constructed to connect the well to Questar’s transmission facilities. Production from the well commenced in June 2005. Two development wells, CSFED 14100 4-32 and the CSFED 14100 4-29 wells, were drilled during the third quarter of 2005. These wells have been completed and connected to the existing production facilities and sales line. Compression facilities were installed and completed in the fourth quarter of 2005. The wells were connected to compression facilities at that time and are currently producing 500-600 Mcf per day cumulatively.

One mile to the west, the CSFED 14100 2-31H well (50% WI; non-operator) reached total depth on January 8, 2006. Horizontal drilling technology was used to evaluate the potential of the thick Almond coal. Casing was set just above the coals at approximately 6,200 feet and the well reached total measured depth of 7,890 feet. This 16-foot bench of coal is present in the surrounding wells and was tested for gas content in the CSFED 14100 SW29 well. The gas content of the coals was nearly 500 standard cubic feet per ton based upon side wall cores taken from the well. Production liner has been set and the well is currently being flow tested. It has been connected to the Chicken Springs production facilities and production testing will continue.

We acquired an interest in 7,858 gross acres on our Chicken Ranch Prospect located in Sweetwater County, Wyoming, immediately northeast of our Chicken Springs Project. We entered into an exploration agreement on a 2,240-acre block within the prospect area to jointly evaluate the potential of the Almond and Ericson sands at depths ranging from 8,500 feet to 10,500 feet. We retained a 33.34% working interest in the 2,240 acres. Drilling of the initial test well commenced during the third quarter of 2005 and production casing has been set to 8,684 feet. Completion work was suspended during the fourth quarter of 2005 due to lease stipulations. The Almond and Ericson sands produce in the immediate area in our Chicken Springs Prospect as well as the Trail Canyon Field to the south. The well is a one mile offset to a well drilled in 1982 that was completed in the Ericson sands and tested at a rate of 750 mcf gas per day. The well was plugged and abandoned due to the lack of pipeline infrastructure and low natural gas prices.

In February 2006 we acquired additional interests within the Chicken Ranch Unit and in contiguous lands. We acquired an approximate 90% working interest in 10,629 gross acres (9,566 net acres).