Through its wholly owned subsidiary Neon Energy Corporation, Neon is Operator and 100% equity owner in the North San Ardo (NSA) oil field, located in the Salinas Basin, onshore California.  NSA is situated immediately to the north of the giant San Ardo field, which since 1947 has produced approximately 500 million barrels of heavy crude oil.  San Ardo is operated by Chevron and Aera, and is subject to enhanced recovery techniques – principally steam flooding – in order to increase production and ultimate recovery.  Presently the field is producing c. 14,000 bopd.

NSA is an anticlinal spur off the greater San Ardo field, and production of the 12° API gravity oil is from the Lombardi Sandstone.  Neon commenced development of the field in 2006, with first commercial production achieved late that year.   Primary production is achieved with pumping assistance, and significant upside exists via the implementation of secondary recovery techniques to lift production and ultimate recovery.  Given its success at the San Ardo field, steam flooding is the most likely solution and such production enhancement techniques are quite common in California. A field-wide steam cycling program is due to commence during June 2010.  Production has recently been increased by drilling of the Lombardi 17-27H horizontal well, and will be increased further in the short term by the drilling of up an additional production well in Q3 2010.

NSA Quick Look

Discovered: 1947

First Production: 2006

Original Oil in Place: 15 MMBbls

Reserves (1P): c. 3.4 MMBbls

Reservoir: Lombardi Sandstone

Depth: c. 2,100 feet

Producing Wells: 12

Water Disposal Wells: 2