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Cobra Oil & Gas Company (CGCA) was formed to identify, explore, and where determined advantageous, develop oil and gas reserves. The Company is currently developing two projects: Utah Oil Sands and Lodgepole & Bakken, in Montana.

In July 2009, CGCA finalized an agreement to purchase a 40% working interest in the Utah Oil Sands Project in Uintah County, Utah from Enercor, Inc. These leases comprise 33,632 acres in entirety, 23 federal leases and approximately 15% of the entire P.R. Spring oil sand deposit. The purchase contract stipulates that Cobra will pay $4.0 million in common stock on the initial closing date and $100,000 in cash. Each 30 days thereafter, Cobra is required to pay $100,000 in cash until the total payment of $5.0 million is covered.

Cobra also has a 100% working interest and approximately 80% net revenue interest in 82,000 net acres in the Williston Basin of Valley County, Montana. The leasehold is mostly federal long-term leases with small annual rentals. The leases surround a recent Starbuck East discovery and are on multiple zone shallow gas trends (primarily Judith River and Eagle) and multiple zone deeper oil trends (primarily Mission Canyon, Lodgepole and Bakken). A major gas pipeline runs near the leasehold.

Investment Highlights

Improving demand for oil and gas

World oil demand is expected to remain strong over the next two years. Population growth, closely linked to economic growth and technology improvement, is a key determinant of oil consumption. Because of the global recession, world oil consumption fell an average of 3.0 million barrels per day (bbl/d) from the fourth quarter of 2008 through the second quarter of 2009. However, the consumption decline is expected to moderate later this year as the global economy improves. Economic activity in Asia has recovered more quickly than anticipated, resulting in upward revisions in estimates. New estimates call for a 1.6 million bbl/d consumption decline in 2009. Global consumption is forecast to grow by 0.9 million bbl/d in 2010.

Growth strategy focused on acquisition of oil sand properties

With conventional oil becoming increasingly difficult and expensive to find and develop, many oil companies are diversifying their portfolios by acquiring interests in unconventional plays such as oil sands. CGCA acquired a working interest in the Utah Oil Sands Project in Uintah County in order to capitalize on large, underdeveloped heavy oil and bitumen reserves.

Oil sands (tar sands) may represent as much as two-thirds of the world's total petroleum resource, with at least 1.7 trillion barrels in the Canadian Athabasca Oil Sands and perhaps 235 billion barrels of extra heavy crude in the Venezuelan Orinoco oil sands. Reflecting the size of Canadian oil sands reserves, it is estimated that 44% of Canadian oil production in 2007 was from oil sands .

Many countries have large deposits of oil sands, including the U.S., Russia, and various countries in the Middle East. The U.S. tar sands resources are estimated at 60 billion to 80 billion barrels of oil. The richest deposits are found in Utah and California. Utah’s in-place oil sands resources are estimated at 14 billion to 15 billion barrels.

Modern in-situ technology increases recovery rates

CGCA has secured the use of an oil extraction process known as In-situ Combustion for its Utah Oil Sands project. The technology enhances oil recovery using conventionally drilled wells, with one well designated for injection, and multiple surrounding wells for oil production, or recovery. After the wells are completed, heat is introduced into the well designated as the injection well, which mobilizes the oil in place for free flow and pumping. Along with the added ease of flow, the heat creates economic benefits by upgrading the oil to a lighter grade. The heat cracks the crude hydrocarbons, vaporizes the lighter hydrocarbons, and deposits the heavier hydrocarbons as coke. The process makes the oil a more suitable feedstock for refining purposes, which potentially enhances the marketability of the end-product.

Utah Oil Sands reserve potential exceeding one billion barrels of oil and bitumen

CGCA has purchased a 40% working interest in the Utah Oil Sands Project in Uintah County, Utah. The leases cover 33,632 acres and approximately 15% of the P.R. Spring deposit. The U.S. Bureau of Mines estimated that the P.R. Spring deposit could contain as many as 4.0 billion to 4.5 billion barrels of oil on CGCA's leases. According to an independent geological report, average oil-in-place from core samples taken from wells on or near CGCA’s leases is 32,530 barrels per acre. Applying this resource estimate across the 33,632-acre leasehold yields a resource estimate of approximately 1.1 billion barrels of oil and bitumen.

Expansion of Utah Oil Sands holdings

In August 2009, CGCA completed the purchase of a 37.5% working interest in an additional 640 gross acres. The purchase price was 300,000 shares of the Company’s common stock. Pioneer Natural Resources holds the balance (62.5% working interest) of the lease.

The Company has also entered into a Letter Of Intent to purchase the remaining 62.5% working interest for the 640 gross acres. Cobra's purchase price will be 300,000 shares of common stock. Other title holders of this lease include Questar Corporation. The transaction could close on or before September 9, 2009.

Option to develop Starbuck prospect in Montana

During FY 2008, CGCA entered into a “memorandum of Intent” with Costal Petroleum Company, which could lead to a formal agreement to acquire certain oil and gas leases from Costal in Valley Creek, Montana. The leases involve approximately 82,800 net acres in the prolific Williston basin. In May 2008 the Company paid Costal $180,000 in exchange for a two-year option to purchase a 50% interest in the leases for $1.0 million.

The leases surround a recent Starbuck East discovery and are on multiple zone shallow gas trends and deeper oil trends. According to the Company, the reserve potential for these shallow gas structures could be 260 billion cubic feet of natural gas (worth approximately $1.0 billion at $4/mcf).

Huge reserves value estimates

Based on prospective reserves estimates, we conservatively estimate CGCA reserves at 1.0 billion barrels of heavy oil, representing a gross value of $70 billion at current oil prices. Steam stimulation technologies should be able to recover approximately 20%-50% of the original oil in place. For our valuation case, we estimate recoverable reserves of 300 million barrels and representing a gross value of $21 billion. The Company’s $39 million market capitalization is tiny compared to our gross reserves value estimates.

Utah Oil Sands

CGCA recently finalized an agreement to purchase a 40% working interest in the Utah Oil Sands Project from Enercor Inc. These leases comprise 33,632 acres, 23 federal leases and approximately 15% of the P.R. Spring deposit. Cobra will pay $4.0 million in common stock on the initial closing date along with $100,000 in cash. The total obligated payment is $5.0 million for the 40% working interest.

The U.S. Bureau of Mines estimates that the P.R. Spring deposit may contain 4.0 billion to 4.5 billion barrels of oil on CGCA's leases. An independent geological report based on core samples from 11 wells on or near CGCA’s leases estimated resources at 32,530 barrels per acre, which is approximately 25% higher than the average for the entire P.R. Spring deposit. Applying this resource estimate across 33,632-acrea leasehold yields a resource estimate of approximately 1.1 billion barrels of oil and bitumen .

A major Blue Chip oil and gas company also holds interests on the leases in the form of a 6.25% overriding royalty interest.

The Company plans to expand its Utah Oil Sands holdings by acquiring interests in several adjacent prospects in Uintah County. On August 6, CGCA agreed to purchase a 37.5% working interest in 640 gross acres owned by Enercor Inc. The purchase price is set at 300,000 shares of the Company common stock. Pioneer Natural Resources holds the balance (62.5% working interest) of the lease.

On August 10, CGCA signed a Letter Of Intent with Enercor to purchase the remaining 62.5% working interest on the 640 gross acres in exchange for 300,000 shares of common stock, fully paid and non-assessable. Other title holders of this lease include Questar Corp. The transaction is expected to close in early September.

North American Oil Sands

Of the world’s total oil resources, more than 2 trillion barrels are in the form of oil sands. Of those 2+ trillion barrels, the greatest concentration lies in North America. Thanks to new extraction technologies and higher energy prices, North America’s oil sands resources have become economic to develop.

Utah Oil Sands

America’s oil sands can be found in Texas, California, Alabama, Kentucky and several other states, but the largest domestic oil sands resource is found in Utah. Utah’s in-place oil sands resources are estimated at 14 billion to 15 billion barrels, with an additional estimated resource of 23 billion to 28 billion barrels.

Utah’s oil sands deposits are in the eastern part of the state, with 24 individual deposits existing in the Uinta Basin, and 50 more deposits scattered across southeastern Utah. The state’s major oil sands deposits have overburden thickness (i.e. depth to the oil sands deposits) ranging from zero to 500+ feet, up to 13 pay zones each, and gross thickness ranging from 10 to 1000+ feet. On an individual deposit basis, estimates of oil in place range anywhere from 100 million barrels to more than 22 billion barrels.

The P.R. Spring deposit in the Uinta Basin is a major oil sands resource. The P.R. Spring and Hill Creek deposits are both part of the same heavy oil accumulation, although they are normally treated as separate deposits. These two heavy oil deposits lie beneath the East Tavaputs plateau in southern Uintah and northernmost Grand Counties, Utah. The estimated size of the deposit is 470 sections (square miles), with 350 sections in the P.R. Spring portion and 120 sections in the Hill Creek portion.

The extent of P.R. Spring and Hill Creek deposits has been delineated by the drilling of 86 shallow test wells, including 14 wells in the general area of CGCA’s leases in Seer Ridge. The drilling tests indicate that Seer Ridge is the richest part of the deposit, with an average resource estimated at 53,840 barrels per acre.