UPDATE:  As a result of relentless and extremely patient efforts over the last 3 years by Joe Kandle and our transactional law firm of Luna and Glushon, we have closed a deal to add another 120 acres of adjoining lands containing 20 idle vertical well bores. Tri-Valley intends to re-work these to put back on production as many as possible while it readies a horizontal well bore campaign on that property as well.

PV-1 experienced its 2^nd steam cycle with a 25% increase in steam volume compared to cycle #1.  As expected, the well was returned to production at significantly higher flow rates and for an extended flow period.  In lieu of putting the well immediately on rod pump, we made a technical decision to temporarily re-steam the well on a 3^rd cycle to accelerate heating the reservoir for the most ideal field-wide and long-term result.

PV-2 is currently on rod pump after adding several uphole Sespe perforation intervals and is indicating an increasing, although relatively minor at this point, oil cut.  Please note that over 15,000 barrels of fracture stimulation load water was placed in this well.  Much of that has to come out before the oil percentage can improve.  

PV-3 is currently on steam cycle #1 with production to follow shortly.

PV-4 has completed its initial steam cycle with our 12.5mm generator and has flowed back at rates commensurate with PV-1’s first steam cycle.

PV-5, PV-6, and PV-7 are completed and ready for steam cycle #1.  

PV-8, the final well in this segment of the drilling campaign on the Hunsucker Lease, has also been successfully drilled and completed and is ready for steam cycle #1. 

To enhance field development economics and decrease our lifting cost, a diluent source* has been contracted and first deliveries will occur in April 2008.  This virtually eliminates and/or minimizes the costly diesel purchases for diluent use and also decreases the volume required due to the 83-85 degree API NGL (Natural Gas Liquids) as compared to 40 degree API diesel or gas condensates. 

Significant new Vaca oil sales commenced again in early April.

Tri-Valley is in the final sourcing and purchasing stages for significant additional emission credits which will allow additional PV work to commence and provide much greater steam generator utilization flexibility.

* The heavy, thick Vaca tar sand oil requires the addition of light oil to thin out and dilute the oil for transport and to meet shipping specs.  Otherwise the oil will revert back to its tar-like consistency.

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Temblor Valley West
The West Temblor Valley property in Kern County lies within the South Belridge Oil Field and contains 50 wellbores including 1 injector/disposal well and 2 pilot water flood injection wells.

The initial five well drilling and completion campaign to delineate the areal extent of the Etchegoin and Diatomite hydrocarbon accumulations has proven to further extend the oil bearing formations approximately one kilometer to the west beyond previous Industry mapping, which potentially adds millions of barrels of oil in place.  In addition, excellent oil saturations have been observed, thus several more viable drilling locations have been identified and permitted to expand the field development pending favorable response from the ongoing waterflood and cyclic steam pilot programs. 

Etchegoin Waterflood: 
Tri-Valley believes up to 2.5 MMBO may yet to be recovered from this zone by flooding the formation with water, a standard secondary recovery technique for old fields.  The waterflood pilot program to assess oil production response and areal water movement was initiated in late June, 2007. This small-scale, closely monitored, injection pilot will lead to waterflood project expansion optimization with the greatest oil recovery and economic returns to all stakeholders, as observed water movement and oil response will dictate the ideal producer and injector locations. 

Incremental production from the Etchegoin waterflood has been less than expectations.  However, we are planning injector modifications to ensure focused Etchegoin water injection for prudent evaluation of waterflood potential in the field. We have agreement from an offset Operator to provide water if needed to expand the waterflood.  This is a crucial accomplishment.

Diatomite Thermal Project: 
D352:  The second steam cycle on this well and first steam cycle of recently added uphole perforations has been completed via injecting 7804 bbls of steam with our LW-22 generator. Early results are encouraging.  The LW-22 generator will be moved to D344 for cyclic steaming pending favorable results from D352.  An alternate plan is to move the unit to PV.

D188:  This well was perforated uphole in the Etchegoin sand and had an initial rate of 34 bopd.  Unfortunately, the well produced excessive sand and an inner liner was installed for mitigation. We have now replaced the inner liner with smaller slots to restore full-time production from this well.  The well is now producing in the early stages.  If we can control the sand, it represents potential Etchegoin primary production. 

Other potential Diatomite exploitation plans include a steamflood pilot and a horizontal producer/vertical injector development scenario.

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