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Montello Resources: The Blowout Well

Alexander Smith
Managing Editor, Pinnacle Digest
October 11, 2007

For weeks, all eyes with regard to Montello Resources Ltd. (MEO:TSX-V) were settled on Tennessee and the John Bowen #2 Test Well and for good reason. The pivotal development announced September 28th required an immediate update to our members in respect to Montello’s program to unlock the overpressured zone which caused the infamous “Blowout Well” of 2002. At an approximate depth of 5,300 feet, Montello reported having encountered the Upper Cambrian Copper Ridge formation that was not originally believed to be hydrocarbon-bearing. Circulation was lost and then quickly recovered along with traces of light oil, gas and major water. These factors strongly suggest that the zone has exceptional porosity and excellent permeability in a completely dolomitized host strata. We believe Montello may in fact have a tiger by the tail and are we are excited to be continuing our coverage as they “drill ahead” to the basement which is estimated to occur between 7,000 to 9,500 feet.

The story behind the infamous “Blowout Well” and the opportunity that exists is more than enough to warrant the recent heavy trading volume. Although the John Bowen #2 Well spurred our initial interest at PinnacleDigest and continues to hold the greatest potential, the progress made at their jointly owned Pincher Creek Property to date has been exceptional. I am specifically referring to Montello’s press release of September 27th 2007 which announced the discovery of two condensate zones with associated gases. Production tubing is currently being run into the 1-11 well with the intention of evaluating and production testing these zones, the company said. The combined condensate and gas rates from these two zones have been reported.

On October 4th it was announced that the service rig has completed its preliminary evaluation of the Brown Sand and the Cadomin / Kootenay formation. Average fluid rates resulted in 225 barrels a day with no water cut and up to 500 mcf/day of gas. The Cadomin / Kootenay formation is a condensate zone with associated gas and no water. Pumping equipment is currently being installed on the property. The magnitude of this small success can only be understood as this region and number of claims in the immediate area become known. This is not a single re-completion well, but a potentially huge gas play. The development strategy for this area is in place and I couldn’t be more excited to watch it unfold. This excerpt taken from their October 4th news release explains what is next.

“The immediate plans as part of a development strategy for this area, is to re-complete a second well and drill a well to test the up-dip extension of this discovery along with the underlying Rundle zone.”

A further excerpt taken from their September 28th press release discussing the Pincher Creek Property is worth noting below:

“This "Upper Zones Play" represents an opportunity to undertake immediate operations to obtain production and prove up additional target wells for revenue enhancement.” This is a very exciting time for this property. Although the mounting hype around the John Bowen #2 Test Well is warranted, we will also be closely evaluating the success being achieved at Pincher Creek.

Read those two excerpts and note the dates. Montello Resources is doing what it says and progressing at rapid pace. This company is wasting no time and we feel it more than necessary to remind our members not to forget about this progress and to stay focused on not one, but both of their projects.

A few short weeks ago we shared a story with you. The story involves a potentially major oil strike that went awry and later became known as the “Blowout Well,” representing a missed opportunity of major proportions. This story began in July of 2002 when a company by the name of Pryor Oil set out to drill for oil on the Howard farm near Lancing, Tennessee. This region and the Tennessee Appalachians were very underdeveloped at that time and remain so. Years later, state geologists would state that the Morgan County has more occurrences of over-pressure incidents than anywhere else in the state of Tennessee.

On July 19th 2002 Pryor Oil encountered extreme underground pressure at roughly 2,400 feet. The well began gushing light gravity crude oil up to 750 barrels per hour. Pryor Oil had unknowingly tapped into an unbelievable prolific oil formation.

After only 24 hours, the well's flow rate was calculated at up to 12,000 barrels of oil. Pryor Oil was simply not ready for this. The immense pressure lifted their drill derrick right off the ground. On the second day, July 20th, a spark ignited the oil which spread immediately to the well. Pryor personnel and volunteers worked ceaselessly for over 36 hours attempting to contain the incident but were forced to stand aside by the Environment Protection Agency (EPA) while oil spewing from the well burned in excess of $15,000.00 an hour. The EPA had intervened to help mitigate the damage to the local environment.

Why did we tell you this compelling story of a major lost opportunity?
Pryor Oil had its opportunity and failed. There was no way of knowing that such a potentially prolific oil reserve lay beneath their Howard White #1 Well, but either way they had their chance and are now in legal battles with the government. On a property that adjoins the Howard farm property, there is a company drilling a little over a mile from the Howard White #1 Well. That company is Montello Resources (MEO:TSX-V) based out of Calgary, Alberta, which is targeting the same big fish that Pryor was unable to reel in. And after viewing what took place in 2002, they have been careful to meticulously prepare themselves for such a similarly major oil strike.

We became familiar with Montello Resources over a month ago and could not wait to bring their story to you. In fact, we liked their story so much, we bought 200,000 shares ourselves at $0.14CDN per share (their current share price is around $0.17 CDN).We also know that management vended in their Mulligan Alberta assets at $0.13CDN per share and along with family, friends and associates participated in previous private placements at $0.13CDN per share.

When Montello won the rights to the historical Howard farm property they had to gain the confidence and respect of roughly a dozen representatives from eight state and federal agencies at a technical presentation in Knoxville. This took place in May of this year. Montello simply laid out their plans and proved that they have world class personnel; personnel who have had extensive success bringing on similar high-pressure wells in geographical comparable regions. These areas include the Alberta Rocky Mountain Foothills and the Middle East. On July 20th 2007 Montello Resources was issued a permit to drill the Bowen #2 Well at its Morgan High Point Project. Interestingly enough, this was exactly five years to the day for our readers who may be superstitious and believe it could be good luck.

On August 15th drilling began at their Bowen #2 Well. We believe our review and coverage of Montello could not have commenced at a more favorable time for our members. Their High Impact drilling program is still ongoing at the John Bowen #2 Well and is expected to take approximately two more weeks to complete by reaching the basement target at between 7,000 to 9,500 feet. Montello is using a technique known as underbalanced drilling to control the potential pressure. We will be immediately updating our "News Room" and our members as to the details of further announcements and encourage you to additionally view third party articles and reports posted on their Home Page for a better understanding of their story.

Montello's management is driven to succeed and is doing everything in their power to ensure the success of this drill program. Although there is great anticipation and focus on the development of this well, it's not everything of note that makes up this Calgary-based junior oil and gas company. Montello Resources are also involved in a deep re-completion of a Manville gas zone located on the Eastern flank of the Albertan Foothills within the Pincher Creek area.

On September 5th it was announced that their Pincher Creek re-completion was officially underway as a rig was moved onto the Pennine Pincher Creek 01-004-29 W4M location on August 31, 2007. Montello will be perforating the Brown Sand, and if prudent the Manville Sand within the next week. This should take 15-20 days to conduct. Management has stated that this "Upper Zones Play" represents an opportunity to undertake immediate operations to obtain production and prove up additional target wells for revenue enhancement. We will be actively updating our review on this project and continue to await news from Tennessee.

Let's take a look at the oil and gas sector.
The value of crude oil has been trading at all-time record high in recent weeks and closed Friday, September 28th at $81.66 a barrel.

The current rally in oil is due to a number of factors. Last week capped off a sixth consecutive week of gains. The influence of hurricanes and refinery closures has pressured the supply of oil of late. The hurricanes will pass, but what is central to oil's increase is that the US Department of Energy continues to reveal that US crude inventories are falling by much more than expected. They are expected to rise shortly, however. On top of the supply issue, OPEC's mid September decision to pump an extra 500,000 barrels of oil per day from November on is thought to provide little relief to tightening market balances. With tensions continuing to rise in the Middle East, the search for domestic oil supplies is becoming more essential by the day. The United States cannot afford to rely on foreign oil supplies for much longer. Domestic oil must be achieved and used to sustain us in the long term.

These are a few of the factors which have us confident in different oil and gas companies, specifically junior oil and gas companies operating in North America.

In respect to Montello's John Bowen #2 Test Well, we know this drill program is quickly becoming one of the most anticipated in the country. Momentum is building as each foot drilled brings them closer to the basement target and is believed to be the region's deepest and most complicated well ever. After researching this company extensively we are proud to announce that Montello Resources is our current Featured Oil and Gas Company. Montello Resources website: is one of the most detailed and informative public company websites we have come across. They are shareholder-driven and no detail is too small to be brought to the attention of the retail shareholder. Montello's Photo Gallery gives readers a bird’s-eye view into the actual construction of their well site right through to the raising of their rig. It is very interesting for first timers to see.

Our coverage of Montello Resources will be extensive as their developments are now ours. Our review will be ongoing with detailed updates and opinions in respect to their two projects which are both enjoying potential major breakthroughs. Below are two supporting articles we found from our research on Montello, they should add to your research. Also feel free to visit Pryor Oil's website below, as it documents the infamous "Blowout Well".

Alexander Smith
Managing Editor, Pinnacle Digest
October 11, 2007

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