80 Years of Challenges - One Solid Company

May 23, 2013

A lot has changed in the past 80 years. Except for our spirit.

In 1933, the average cost of a new home was $5,750. A gallon of gas cost 10 cents. Prohibition was repealed. Standard Oil of California was granted a concession to explore for oil in Saudi Arabia.

And The Termo Company was founded by EE Combs and Roscoe Oakes.

It was the midst of the Great Depression. Starting a company was a huge risk. But EE's pioneering spirit wouldn't let him give up on his dream. It's that same entrepreneurial spirit that has kept us in business for 80 years, through the ups, downs, adventures, gambles and successes.

The following is excerpted from The Termo Company – History and Highlights by Eldredge Combs, 1979:

“It all started with the discovery of oil on Signal Hill in 1921. E.E. COMBS, a resident of Long Beach, had recently sold his newspaper distributorship and was looking for new business ventures. The discovery intrigued him. Although he possessed no knowledge of any phase of the oil business, he was astute enough to feel that the entire Signal Hill structure could be productive.

There was a frenzy of town-lot leasing taking place but, with considerable legwork, he located three lots about one mile from the discovery well. With no hesitation he mortgaged his home and purchased the lots. These lots were under lease but he managed to obtain one of the lots for development. To finance, the drilling percent’s were sold to various friends.

With more confidence than was justified, he began drilling with pickup crews and without a superintendent. Haphazard drilling to a depth of 4000 feet took six months and necessitated the selling of many more percent’s. The well was eventually completed for 5000 barrels daily and a new independent operator was born. From then on he was affectionately known as "E.E." or "Ernie" in the always, informal oil fraternity."

Lateral Pond Niobrara and Mowry Shale

Campbell County, Wyoming

Termo continues to study the potential for horizontal Niobrara and Mowry Shale development in our Lateral Pond project area near Gillette. With 15,000 gross acres in the project area, it has the potential to be a significant resource play for the company.

Our first attempt at producing from the Mowry was the Bishop #43-17 well, drilled in early 2010, and completed with a three stage ‘frac’ into the upper, mid, and lower portions of the zone. The first portion of the frac went off as planned, but the third stage did not work.

We have conducted some fairly extensive evaluation and diagnostic work on the well and it seems that the more data we get the more questions are raised. NuTech Energy Alliance of Houston conducted an extensive evaluation of the logs and the fracture stimulation. The evaluation tells us that we have approximately 100 feet of pay per shale zone, both contain significant volumes of oil and both have very low permeability. In addition, the frac impacted the Mowry interval to a distance of 250 feet from the well bore.

The bottom line from these studies is that oil is present but the ability to unlock it from the formation is the challenge before us at this time. We remain hopeful that we will find a way to access these reserves and make the Mowry a commercial venture. We have gone back to the drawing board and are ramping up our technical knowledge. We are also gaining knowledge by participating as a non-operator in another well in the area.

Based on other operator’s activities in the area, including Chesapeake, we remain confident that the secrets of the Niobrara and Mowry shale in this area will eventually be unlocked and we intend to be there when it happens.

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