Implementation of the work program of Budget Period 2 of the East Binger Unit (''EBU'') DOE Project continues. The drilling of new horizontal well EBU 63-2H, scheduled for this reporting period, was delayed due to a lack of rig availability. This well was spud near the end of the reporting period. EBU 59-1 was converted to injection service, and injection capacity at the plant was increased from 19 MMscf/d to 22 MMscf/d. Although other factors have temporarily limited the field's ability to fully utilize the increased capacity, injection in the pilot area has been increased over 2 MMscf/d since the start of the project. Nitrogen recycle within the pilot area has been reduced with the projects implemented to date. Prior to pilot development, nitrogen production was 56% of nitrogen injected. Currently, nitrogen production is only 26% of injection. Pilot area oil production has increased 90 bpd or 30%, with 160 bpd from new wells offset by a loss of 70 bpd from wells converted to injection.

Budget Period 2 of the East Binger Unit (''EBU'') DOE Project has been. Recent activities included additional data gathering and project monitoring, plus initiation of work on an SPE paper on the modeling efforts of the project. Early production performance suggests horizontal wells do not provide sufficient additional production over vertical wells to justify their incremental cost. It will take more time to evaluate the impact of the horizontal wells on sweep and ultimate recovery, but it is unlikely that an improvement in recovery will be sufficient to make the overall economic value of horizontal wells greater than the economic value of vertical wells. Monitoring of overall performance of the pilot area continues. Overall response to the various projects continues to be very favorable. Injection into the pilot area has nearly doubled, while gas production and nitrogen content of produced gas have both decreased. Nitrogen recycle within the pilot area has dropped from 60% to 20%. Efforts to further disseminate knowledge gained through this project, by means of technical paper presentations to industry groups, are underway. Project monitoring and technology transfer will be focus areas of Budget Period 3.

The first horizontal well ever in the Marchand sandstone has been drilled. Although major difficulties arose with certain aspects of the drilling operation, a horizontal section of approximately 1300 was drilled. The section was left open hole as planned. The shales just above and between the Marchand sands appear to be very water-sensitive, requiring careful drilling practices. These shales were encountered in the middle part of the curve (45{sup o}-60{sup o}), which can be the most difficult part of a directional well to clean. Difficulties with these shales and cleaning this section led to a parted drill string, requiring a sidetrack. There were no major geologic ''surprises'', such as formation tops coming in much shallower or deeper than expected, or unexpected faults. Thin kaolinite beds were encountered in the horizontal section of the well. Previous descriptions of the mineralogy of this formation did not mention any kaolinite. The lateral extent of these beds is unknown. Completion of the well is under way. One additional injection profile was gathered during the quarter. Results are consistent with other recently profiles that show gas within the C Sand is overriding the oil and failing to sweep the deeper parts of the reservoir. International …