drilcooilgas.comdrilcooilgas.com/docs/summarypowerpoint20161hdrillingprogram.pdfan investment in an...

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DRILCO OIL & GAS, INC.

Managing General Partner

P.O. Box 385

Grantsville, WV 26147

Office (304) 354-9516

Fax (304) 354-6809

Cell (304) 550-0978

Website: www.DrilcoOilGas.com

_________________________________________________________________________________

2

COVER PAGE 1

TABLE OF CONTENTS 2

FORWARD LOOKING STATEMENTS 3

COMPANY PROFILE 4

OFFERING SUMMARY 5

PROJECT INVESTMENT OVERVIEW 6

ECONOMIC REPORT – WELL PAD PAIR 7

TOPOGRAPHICAL MAP OF INTIAL DRILLING LOCATIONS 8

PLAN OF DRILLING 9, 10, 11, 12, 13

AUTHORIZATION FOR EXPENDATURE – VERTICAL WELL 14

AUTHORIZATION FOR EXPENDATURE – HORIZONTAL WELL 15

TAX CONSIDERATIONS 16

TERMS AND DEFINITIONS 17, 18

HOW TO CONTACT DRILCO 19

TABLE OF CONTENTS:

3

By viewing the following material, I certify that I understand and agree to the following:

DISCLAIMER: Information within this material contains “forward looking statements” within the meaning of Section 27A

of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. These forward looking statements

are based under the Private Securities Litigation Reform Act of 1955 (the “Act”) which provides a “safe harbor” to

encourage companies to provide prospective information about their companies, so long as those statements are

identified as forward looking and are accompanied by meaningful, cautionary statements identifying factors that could

cause actual results to differ materially from those discussed in the statement. Drilco Oil and Gas, Corp. in conjunction

with Drilco 2016 1H Drilling Program, LLC desires to take advantage of the “safe harbor” provisions of the Act.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,

objectives, goals, assumptions or future events or performance are not statements of historical fact and may be forward

looking statements. Forward looking statements are based on expectations, estimates and projections at the time the

statements are made that involve a number of risks and uncertainties which could cause actual results or events to

differ materially from those presently anticipated. Forward looking statements in this action may be identified through

the use of words such as; Projects, foresee, expects, will, anticipates, estimates, believes, forecasts, quotes, understands

or that by statements indicating certain actions like; may, could, or might occur.

An investment in an oil and gas drilling program limited partnership is considered to be highly speculative in which

results cannot be exactly predicted and which necessarily involve the risk of partial or total loss and should not be

considered unless the company or investor can afford a complete loss of investment. Units should be purchased only by

investors who have no need for liquidity and are able to bear the economic loss of their entire investment. Subscribers

should carefully consider whether an investment in Units is suitable in light of their financial condition and

requirements. All information contained within this document and supporting documents pertaining to investing in the

offering must be understood as information provided and not investment advice and should not be relied upon as

statements of fact.

Investors are responsible for verifying all claims and conducting their own Due Diligence.

Drilco 2016 1H Drilling Program, LLC and Drilco Oil and Gas, Corp advises all readers to seek advice from professional

financial representatives before deciding to invest in such investments. None of the material provided shall be construed

as any kind of investment advice or solicitation. Drilco Oil and Gas, Corp and Drilco 2016 1H Drilling Program, LLC is not a

registered investment advisor.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of

these securities or determined if this memorandum is truthful or complete. Any representation to the contrary is a

criminal offense.

FORWARD LOOKING STATEMENTS

4

Drilco Oil and Gas Corporation Overview:

Drilco: Drilco has been in business since 1995 and has a team of Oil and Gas Professionals who have decades of

experience in oil & gas exploration, drilling and production and completion. Drilco Oil & Gas is owned by third

generation Oil and Gas operators within the Appalachian basin and their team has over 100 combined years of

experience in Oil and Natural Gas Exploration, Drilling, and Production. Drilco Oil and Gas is a 3rd generation oil and gas

producer/operator in West Virginia.

Drilco’s owner and President, Hugh Dale, has extensive knowledge of oil and gas drilling operations, oil and gas formations and

negotiating lease contracts within the Appalachian Basin. Since 1995, when Drilco Oil and Gas was founded, Drilco has led the way

in innovative solutions for oil and gas exploration, drilling and processing. Drilco’s professionals are considered some of the most

seasoned oil and gas veterans in West Virginia. Drilco's management has over 100 years of combined exploration and

production experience in this region. To develop its resources, Drilco has expanded from drilling five wells in 1995 to over 200

wells for the period comprising 1995 through 2016, for an aggregate total of over 200 wells in the Pr oject Areas. Through its

crude oil and natural gas gathering system, Drilco also controls the gas gathering system and crude oil infrastructure for al l

Project Areas, as well as the gas processing facilities. Drilco is dedicated to maintaining superior ope rating standards and has

received several Oil and Gas Drilling and Reclamation Awards from the West Virginia Department of Environmental Protection,

Office of Oil & Gas.

Officers and Directors:

Hugh Dale, is the President/CEO and has 35 years operations experience in all aspects of Oil and Gas Drilling, and Completion

Operations. He serves as President and CEO of Drilco Oil and Gas Corporation. He has supervised the drilling and completion of

hundreds of oil and gas wells in the Eastern Region and Midwest Region of the United States. Crude oil and natural gas production

has been in the Dale family for three generations. As the Owner and Operator, he is involved in Drilling, Exploration and the

Production of Oil and Natural Gas in the Appalachian Basin. His expertise begins with acquiring the initial lease to continued well

operation and service, years beyond initial production.

Cynthia Dale, acts as Office Manager, and Vice-president and Treasurer of Drilco Oil and Gas Corp.

COMPANY PROFILE

http://drilcooilgas.com/team.html

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Drilco Oil & Gas Corp. in Partnership with Drilco 2016 1H Drilling Program, LLC is seeking to raise $30,000,000.00 through the sale of 300

units at $100,000 each for an Oil and Gas Drilling Program that will consist of a planned 10+ Vertical and 10+ Horizontal Wells through multiple oil

and gas producing zones. Each of the wells may be drilled on various leaseholds held by Drilco Oil & Gas Corp. in the State of West Virginia. This

venture is open to Accredited Investors meeting the SEC’s criteria and is filed as a 506(c) Regulation D Offering with the SEC. The Wells will be

drilled cost+15% meaning that whatever the wells cost to drill and complete Drilco will be compensated by 15% over the direct cost of drilling and

any leftover monies will be put in the True-up account and used to drill more well(s) for the partnership. Drilco will be doing the work and is

providing the leases for drilling and as such expects to be compensated by 25% of the profits until payout of the investment at which point Drilco’s

Reversionary interest comes into effect and profits will be shared 50/50 with the unitholders (investors). The duration of the partnership is 25

years and investors in this drilling program will have the first knowledge and opportunity to participate in future drilling programs with Drilco Oil

and Gas Corp.

This Brief Summary is provided on a confidential basis for evaluating the private placement of up to 300 Units of limited partner

("LP') and general partner ("OP') interests ("Units") in Drilco 2016 1H Drilling Program, a West Virginia limited partnership (collectively, the

'Partnership"), at a subscription price of $100,000 per Unit ("Unit Price"). If the maximum offering amount is raised, it is then anticipated

that the Partnership will participate with Drilco Oil & Gas, Inc. ("Drilco") in drilling 20+ crude oil and natural gas development wells,

primarily in the upper Mississippian Section and Devonian Shale horizons with up to ten (10) vertical wells and ten (10) hori zontal wells

crude oil and natural gas producing sandstones ("Program Wells"), on Drilco's prospects (the "Prospects") within the Appalachian Basin

spanning seven counties in West Virginia (the "Project Areas"). Operations will be conducted through a joint venture between each

respective Partnership and Drilco (the 'Program"). The Program will be capitalized 75% by the Partnership from the sale of Units (the

"Partnership Position") and 25% by Drilco (the "Drilco Position").

Drilco will be the managing general partner of the Partnership and the Program and will assign well bore working interests in the Prospects to the Program. Drilco will receive a non-recurring location fee and management fee from the Program for each assigned Prospect and will earn a reversionary interest in the Program that will increase the Drilco Position from 25% after total distributions to the Unitholders reach 110% of their investment. Drilco may increase the size of the offering, along with its proportionate Program contributi on, by up to 20% for any over-subscriptions, which would increase the maximum offering amount by up to $6,000,000 for a total maximum offering of up to $36,000,000.

To purchase Units, subscribers must qualify as "accredited investors," as defined under the Securities Act of 1933 (the "Securities Act'). Drilco may accept non-accredited sophisticated investors on a case by case basis, for investment in the Partnership, at the sole discretion of the Partnership. Transfers of the Units will be restricted under the Securities Act and the Partnership Agreement. Investo rs may elect to purchase either General Partnership (GP) Units or Limited Partnership (LP) Units. During the drilling and completion phase, purchasers of GP Units will have unlimited liability for Partnership obligations, but will be entitled to apply their tax deductions from the Partnership against their active income from other sources under the working interest owner exception from the passive activity loss rules. When the drilling phase is completed, all outstanding GP Units will be converted into LP Units, limiting the holders' l iability for Partnership obligations arising after the conversion.

The Units are being offered on a "best efforts" basis by Drilco Oil and Gas officers or if any selling agent agreements are made between Drilco and any financial advisors, companies, investment banks, or members in good standing of the Financial Industry Regulatory Authority ("FINRA") (the "Selling Agents") and, on a limited basis, by affiliates and employees of Drilco. The Partnership will pay a commission based on investment banking terms Lehman Scale on all Units sold by that Selling Agent. No Commissions or fees will be paid on Units sold through affiliates or employees of Drilco.

OFFERING SUMMARY

6

Planned Region: ------------------------------------------------------ Ritchie County West Virginia (United States)

Drilling Operator: ---------------------------------------------------- Drilco Oil and Gas

Investment Type: --------------------------------------------------- Vertical and Horizontal Drilling Program

– per wellpad site

Placement Description per well pad

(1 Vertical +1 Horizontal well pair) ------------------ $2,275,375

Total Capitalization for a Fully Funded Program ------------ $30,000,000 (10 to 11+ pads, about 23 Wells total)

Working interest per well ----------------------------------------- 100%

Net Revenue Interest per well

(After royalty owners are paid) --------------------- 87.5% Net Revenue Interest

Formations/ Pay zones: ------------------------------------------- Big Injun & Berea Sandstone, Big Lime Formation, and

Upper Devonian Shale through to Marcellus Shale for

vertical wells - Big Injun sandstone formation for initial

horizontal Wells (Horizontal wells 1-5)

Estimated Ultimate Recovery (EUR) of Oil

per Vertical+Horizontal well pad --------------------- 428,144 barrels of oil

Estimated Initial Production (IP) Rate of Oil per well pad- 198 barrels of oil per day

Estimated Ultimate Recovery (EUR)

of Natural Gas per well pad --------------------------- 1,431,530 MCF of natural gas

Estimated Initial Production (IP) Rate

of Natural Gas per well pad --------------------------- 450 mcf per day

Payout Initial Investment

(2.3 MM for Vertical+Horizontal well pair)-------- 13 Months after production begins on well pad pair

Five Year Return on Investment

(five yrs. net partnership rev/$2,275,375 ---------- 326% Return on investment after 5 years of production

Return on Investment (24 yrs, net partnership rev/$2,275,375- 1116% Return on investment over 24 years

Life Expectancy of wells -------------------------------------------- 25 plus years

Production will likely continue beyond 25 years or until economically unfeasible

PROJECT INVESTMENT OVERVIEW

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Date OilBBLs Oil$BBL Nat Gas (MCF)Btu

Adjustment $MMBTU

year 1 72,270 50.00$ 164,250 1.2 3.00$

year 2 48,180 55.00$ 109,500 1.2 3.00$

year 3 32,119 60.00$ 69,350 1.2 3.50$

year 4 20,075 70.00$ 51,830 1.2 4.00$

year 5 12,775 70.00$ 51,830 1.2 4.00$

years 6 to 24 242,725 70.00 984770 1.2 4.79

Grand total 428,144 1,431,530 1.2

Date

Total Gross Oil and

Gas $

working

interest

Royalties and

Severance tax due

monthly

operating+1time

mgmt & location

fee

year 0 NA

year 1 4,204,800$ 100% 798,912$ (178,000)$

year 2 3,044,073$ 100% 578,374$ (18,000)$

year 3 2,218,431$ 100% 421,502$ (18,000)$

year 4 1,654,034$ 100% 314,266$ (18,000)$

year 5 1,143,034$ 100% 217,176$ (18,000)$

years 6 to 24 22,650,586$ 100% 4,303,611$ (342,000)$

Grand total 34,914,959$ 100% 6,633,842$ (592,000)$

Cumlative cash flow (initial

investment+net partnership

income)

2,275,375$

6,500,910$

7,408,767$

5,503,263$

7,950,963$

9,729,892$

11,051,660$

11,959,517$

TOTAL Net cash Flow (initial investment, one

time mgmt/location fee, monthly operating costs,

severance tax and royalty owners paid)

(2,275,375)$

952,513$

3,400,213$

5,179,142$

Gross Gas Rev. (yearly Mcf x

$/MMBTU x BTU adjustment)

16,990,750$

27,480,785$

591,300$

394,200$

291,270$

248,784$

248,784$

5,659,836$

7,434,174$

Gross Oil Revenue

3,613,500$

2,649,874$

1,927,161$

1,405,250$

894,250$

25,413,742$

25,413,742$ 29,964,492$

29,964,492$

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

0 5 10 15 20 25

YEA

RLY

PR

OD

UC

TIO

N (

BA

RR

ELS

/ M

CF)

Year

Drilco Ritchie County Horizontal+Vertical combined on shared wellpad

Combined MCFYear

CombinedBBLs/year

Vertical oil bbls

Vertical MCF Year

Horizontal MCFYear

Horizontal Oil bbls

ECONOMIC REPORT-WELL PAD PAIR

8

PAD 6 Vertical #6

PAD 4 Horizontal #4

Vertical #4

PAD 1 Horizontal #1

Vertical #1

PAD 3 Horizontal #3

Vertical #3

PROPOSED

PAD 5 Horizontal #5

Vertical #5

PROPOSED

PAD 9

Vertical #9

PROPOSED

PAD 8 Vertical #8

PAD 2 Horizontal #2

Vertical #2

PROPOSED

PAD 10 Vertical #10

ANTICLINE

Proposed Ada Hall Leases Well Locations Drilco Oil and Gas Corporation in cooperation with Drilco 2016 1 H Drilling Program 10/27/2016

PROPOSED

PAD 7 Vertical #7

9

DRILCO WELL PROPOSAL ADA Hall Leases Richie County, WV

Vertical Wells Horizontal Wells

Pad #1 Pad #1

Pad #2 Pad #2

Pad #3 Pad #3

Pad #4 Pad #4

Pad #5 Pad #5

Pad #6

Pad #7

Pad #8

Pad #9

Pad #10

Pad #1

Drill a vertical and horizontal well

Vertical

Drill Vertical well first for Information

Complete vertical in productive zones determined from the electric log

Wells will be on North-West slope of anticline, with lateral drilling toward anticline to extract trapped oil reserves

Horizontal

Drill a horizontal well from the same pad (30’ spacing)

Lateral in chosen zone based on electric log of vertical well (Big Injun, Weir, etc.)

Landing Point in formation will be approximately 600’ vertical section from the vertical well location

Lateral will be drilled to the southeast at approx. 90.3 degree inclination to match formation dip

Lateral will be approximately 2500’ from landing point in formation to the anticline

Drilling

Drill 7-7/8” hole to approx. 5400 MD, 1950’ TVD (Injun)

Run 4 ½” casing with solid centralizer every 5 joints to 5400’ MD

Cement 4-1/2” casing with specially blended cement to eliminate free water and channeling

10

Frac

Use Composite frac plugs to separate frac stages

200’ stages (2 clusters of shots, 100’ apart)

Approximately 13 frac stages, using 60,000# sand each (780,000# total)

Pad #2

Drill a vertical and horizontal (30’ on location spacing)

Vertical


Wells will be on South-East slope of anticline, with lateral drilling toward anticline to extract trapped oil reserves

Horizontal

Drill a horizontal well only (offset to existing vertical well – per. 2711)

Well will be on South-East slope of anticline, with lateral drilling toward anticline to extract trapped oil reserves

Lateral in chosen zone based on electric log of vertical wells (Big Injun, Weir, etc.)




Drilling

Drill 7-7/8” hole to approx. 6100 MD’, 1950’ TVD (Injun)



Frac




Pad #3

Drill a vertical and horizontal well (30’ on location spacing)

11

Vertical



Horizontal






Drilling




Frac




Pad #4


Vertical



Horizontal






12

Drilling




Frac




PROPOSED Pad #5


Vertical


Wells will be on South-East slope of anticline, with lateral drilling toward anticline to extract trapped oil reserves

Horizontal




Lateral will be drilled to the west at approx. 90.3 degree inclination to match formation dip


Drilling

Drill 7-7/8” hole to approx. 5400’ MD, 1950’ TVD (Injun)



Frac




Pad #7

13

Vertical

Drill 1 vertical well


Well will be North West of anticline and will be used to develop trapped acreage and extract trapped oil reserves

Pad #8

Vertical



Well will be on South-East slope of anticline and will be used to develop trapped acreage

Pad #9

Vertical



Well will be on South-East slope of anticline and will be used to develop trapped acreage

Pad #10

Vertical



Well will be on South-East slope of anticline and will be used to develop trapped acreage.

14

AFE #

V1

PROGRAM YEAR

2016

BRANCH DISTRICT PROJECT

N/A Union HorVertical Pilot Oil Well

1 $50,000 $50,000

2 $125,000 $125,000

3 $25,000 $25,000

4 FT 10 Days N/A N/A

5 FT day rate N/A N/A day rate on rig and steering AFE based on 10 days drilling time

6 10 Days @ 13,500.00$ $135,000 $135,000

7 10 Days @ N/A N/A

8 $73,125 $73,125

9 $10,000 $10,000

10 $6,250 $6,250

11 $5,000 $5,000

12 N/A N/A

13 $62,500 $62,500

14 Well Supplies (Centralizers, Float Equip., DV Tools, Baffles, etc.) $3,500 $3,500

15 $37,500 $37,500

16 $18,750 $18,750

17 Perforating (Includes: CBL Log and any cased hole electric line work) $15,000 $15,000

18 Stimulation - Acidizing & Fracturing (inc.: tank rental & water hauling) $120,000 $120,000

19 $37,500 $37,500

20 $18,750 $18,750

21 $12,500 $12,500

22 $50,000 $50,000

23 $7,500 $7,500

24 $25,000 $25,000

25 Contract Labor (includes roustabout services, welders, power tongs) $37,500 $37,500

N/A N/A

875375 $875,375.00 $0 $0

Tubing 2 7/8 7300 FT @ -$ -$ -$

Casing -Conductor 13 3/8 30 FT @ -$ -$ -$

-Surface 9 5/8 1000 FT @ -$ -$ -$

-Intermediate 7" 2200 FT @ -$ -$ -$

-Production 4 1/2 7300 FT @ -$ -$ -$

-$ -$

N/A N/A

-$ -$

N/A N/A

N/A N/A

N/A N/A

N/A N/A

$0.00 $0.00

875375 $875,375.00

NET INTANGIBLE COSTS

NET TANGIBLE COSTS

NET TOTAL COSTS

GROSS TOTAL COSTS

INT

AN

GIB

LE

S

GROSS INTANGIBLE COSTS

TA

NG

IBL

ES

-Flow Lines / Gathering Lines

Power, Fuel & Water (for drilling operations only)

ADA HALL VERTICAL 1

Union District Ritchie Co. WV

PROJECTED TOTAL DEPTHREQUEST DATE

AREAPROPERTY NUMBER

2016 Drilling Program

TYPE CODE AND DESCRIPTION

SCHEDULED START DATE

GROSS TANGIBLE COSTS

Drilco 2016-2017 Drilling Program/Recompletion AFEWELL NAME & NUMBER Drilco

6/11/2017 6000

Contract Drilling: Turnkey

OPERATOR

Drilco Oil and Gas

SCHEDULED COMPLETION DATE

6/1/2016-3/31/2017

Drilco Vertical Pilot Oil Well ADA HALL 364 ACRE TRACK

STATE LEGAL DESCRIPTION PRIME OBJECTIVE

Vertical Pilot Oil Well

LAND LEASE NUMBER

WV

JOA NUMBER

Ada Hall 364 acres

REGION

Appalachin Basin

COUNTY

Ritchie County 364 Acres Union District Ritchie County WV

GROSS WORKING INTEREST COST DETAIL ($)

TITLE APPROVAL/PLAT DATE

HBP Leases

DESCRIPTION OF PROPOSAL OR REASON FOR SUPPLEMENT

Drilling Vertical Pilot Oil and Gas Well through the Devonian Shale. Ritchie County West Virginia

PROPOSED CASING POINTS:

Tubing 2 7/8 6000ft, Conductor 13 3/8 30ft, Surface 9 5/8 1000ft, Intermediate 7" 2200ft, Production 4 1/2 7300 ft

PREPARED BY & DATE

Hugh Dale 10/27/2016

Contract Drilling: Day work

COMPLETED HOLE

Incremental

Costs

BOOKED PUD RESERVES )MMCF

800mmcf and oil @ 200,000 barrels

Directional Drilling Services

Land Services, (Surveying, Title Opinion, Permitting, Damages, ROW's)

Location Construction (Labor, stone, culverts, fabric, filter, fence, etc.)

ACCOUNT COST CATEGORIES DRY HOLE

ORIGINAL ESTIMATE

REVISED TOTAL

Contract Drilling: Footage

Supervision (Company or Contract Drilling Foreman)

Transportation of water and hauling

Rental Pipe inspection/repair

-Tank Batteries & Separators

-Electric Systems & Transmission Lines

Equipment Rental ; foam air; BOP's, forklift etc. EXCESS

Well Equipment: -Surface All well heads/tubing

-Subsurface Packer system

Lease Equipment: -Artificial Lift RODS/PUMP

Logging (Openhole Logs)

Completion Unit (Service Rig, etc.)

Pit Treatment / Solidification

Water Disposal (Drilling & Completion Fluids)

Locations Restoration / Reclamation/ dozer rental

Cementing (Prod., Plugback, and P&A) nitrogen to set packers

Mobilization / Demobilization (Moving drilling unit to/from drill site)

Bits 17 1/2 12 1/4 8 1/2 6 1/4 TOTAL

Equipment Rental ; foam air; BOP's, forklift etc.

REVISED ESTIMATE

ORIGINAL AFE

REVISED / SUPPLEMENTAL AFE

Mud Logging Services

Drill pipe rental

Drilling Mud & Chemicals

15

AFE #

H1

PROGRAM YEAR

2016

BRANCH DISTRICT PROJECT

N/A Union Hor Horizontal Oil Well

1 $50,000 $50,000

2 $125,000 $125,000

3 $25,000 $25,000

4 FT 10 Days N/A N/A

5 FT day rate N/A N/A day rate on rig and steering AFE based on 10 days drilling time

6 10 Days @ 13,500.00$ $135,000 $135,000

7 10 Days @ 18,025.00$ $180,250 $180,250

8 $73,125 $73,125

9 $30,000 $30,000

10 $6,250 $6,250

11 $25,000 $25,000

12 N/A N/A

13 $62,500 $62,500

14 Well Supplies (Centralizers, Float Equip., DV Tools, Baffles, etc.) N/A N/A

15 $37,500 $37,500

16 $18,750 $18,750

17 Perforating (Includes: CBL Log and any cased hole electric line work) $15,000 $15,000

18 Stimulation - Acidizing & Fracturing (inc.: tank rental & water hauling) $315,000 $315,000

19 $37,500 $37,500

20 $18,750 $18,750

21 $12,500 $12,500

22 $50,000 $50,000

23 $7,500 $7,500

24 $25,000 $25,000

25 Contract Labor (includes roustabout services, welders, power tongs) $37,500 $37,500

1287125 $1,287,125.00 $0 $0

Tubing 2 7/8 7300 FT @ -$ -$ -$

Casing -Conductor 13 3/8 30 FT @ -$ -$ -$

-Surface 9 5/8 1000 FT @ -$ -$ -$

-Intermediate 7" 2200 FT @ -$ -$ -$

-Production 4 1/2 7300 FT @ -$ -$ -$

3,060.00$ 3,060.00$

$0.00 -$

-$ -$

96,000.00$ 96,000.00$

12,000.00$ 12,000.00$

-$ -$

-$ -$

$111,060.00 $111,060.00

$1,398,185.00 $1,398,185.00

NET INTANGIBLE COSTS

NET TANGIBLE COSTS

NET TOTAL COSTS

GROSS TOTAL COSTS

INT

AN

GIB

LE

S

GROSS INTANGIBLE COSTS

TA

NG

IBL

ES

-Flow Lines / Gathering Lines

Power, Fuel & Water (for drilling operations only)

ADAH HALL HORIZONTAL 1

Union District Ritchie Co. WV

PROJECTED TOTAL LENGHREQUEST DATE

AREAPROPERTY NUMBER

2016 Drilling Program

TYPE CODE AND DESCRIPTION

SCHEDULED START DATE

GROSS TANGIBLE COSTS

Drilco 2016-2017 Drilling Program/Recompletion AFEWELL NAME & NUMBER Drilco

6/25/2017 6000

Day rate on rig and steering AFE based on 10 days drilling time

Contract Drilling: Turnkey

OPERATOR

Drilco Oil and Gas

SCHEDULED COMPLETION DATE

6/1/2016-3/31/2017

Drilco Horizontal Oil Well ADA HALL 364 ACRE TRACK

STATE LEGAL DESCRIPTION PRIME OBJECTIVE

Horizontal Oil Well

LAND LEASE NUMBER

WV

JOA NUMBER

Ada Hall 364 acres

REGION

Appalachin Basin

COUNTY

Ritchie County 364 Acres Union District Ritchie County WV

GROSS WORKING INTEREST COST DETAIL ($)

TITLE APPROVAL/PLAT DATE

HBP Leases

DESCRIPTION OF PROPOSAL OR REASON FOR SUPPLEMENT

Drilling Horizontal Oil Well on turn key bases with AFE Drill and case this well projected lateral length of 2500-3000 ft & 12 stage frac.

Anything over 10 days day rate is $32,162 a day. $360,000 loss of tools/motor etc.

PROPOSED CASING POINTS:

Tubing 2 7/8 6000ft, Conductor 13 3/8 30ft, Surface 9 5/8 1000ft, Intermediate 7" 2200ft, Production 4 1/2 7300 ft

PREPARED BY & DATE

Hugh Dale 10/27/2016

Contract Drilling: Day work

COMPLETED HOLE

Incremental

Costs

BOOKED PUD RESERVES )MMCF

800mmcf and oil @ 200,000 barrels

Directional Drilling Services

Land Services, (Surveying, Title Opinion, Permitting, Damages, ROW's)

Location Construction (Labor, stone, culverts, fabric, filter, fence, etc.)

ACCOUNT COST CATEGORIES DRY HOLE

ORIGINAL ESTIMATE

REVISED TOTAL

Contract Drilling: Footage

Supervision (Company or Contract Drilling Foreman)

Transportation of water and hauling

Drilling Overhead/Anytime over 10 days $13,500/day work $18,025 directional drilling

Miscellaneous Contingency/Directional tool repair/tool and motor loss $360,000

Rental Pipe inspection/repair

-Tank Batteries & Separators

-Electric Systems & Transmission Lines

Equipment Rental ; foam air; BOP's, forklift etc. EXCESS

Well Equipment: -Surface All well heads/tubing

-Subsurface Packer system

Lease Equipment: -Artificial Lift RODS/PUMP

Logging (Openhole Logs)

Completion Unit (Service Rig, etc.)

Pit Treatment / Solidification

Water Disposal (Drilling & Completion Fluids)

Locations Restoration / Reclamation/ dozer rental

Cementing (Prod., Plugback, and P&A) nitrogen to set packers

Mobilization / Demobilization (Moving drilling unit to/from drill site)

Bits 17 1/2 12 1/4 8 1/2 6 1/4 TOTAL

Equipment Rental ; foam air; BOP's, forklift etc.

REVISED ESTIMATE

ORIGINAL AFE

REVISED / SUPPLEMENTAL AFE

Mud Logging Services

Drill pipe rental

Drilling Mud & Chemicals

16

The information provided in the memorandum with respect to taxes is (I) not intended to be used and cannot be

used to avoid penalties if the IRS successfully asserts a tax position that is different from what is described, and

(II) the information provided was written to support the marketing of the project, and (III) each prospective

unitholder (investor or participant) should seek advice from their own independent tax advisor, based on his,

her, or its own particular circumstances.

The following contains a highly-summarized identification of certain tax considerations that may apply to

investments in oil and gas programs. The information outlined may or may not apply to the program depending

on numerous variables that may not be known in advance including the final costs and expenditures incurred by

the project. Each unitholder (investor or participant) is responsible for consulting his, her, or its own tax advisor

concerning all tax consequences of an investment in the program.

Intangible Drilling Costs – An 85-90% write-off of the investors’ capital is going to be structured by the managing

general partner, provided that the investors invest as general partners. After investors capture the tax write-off,

they will be rolled over to being a limited partner so all liability will focus on the managing general partner.

Investors will capture 100% of the tax deduction potential of the IDC’s and Drilco will make their best effort to

ensure that the unitholders/investors will be able to expense in year occurred.

The drilling and completion costs for the Program Wells will be allocated under the Drilling and Operating

Agreement in a proportion of 85% to intangible drilling and development costs ("IDC" or "Intangible Drilling Costs")

and 15% to tangible equipment and completion costs ("Tangible Costs"). Under the "functional allocation"

provisions of the Program Agreement up to all of the IDC will be allocated to the Partnership which will in turn

allocate such IDC to the Unitholders, up to the total of their investment, with the remaining IDC and the Tangible

Costs expected to be allocated to Drilco. Drilco will endeavor to structure its future drilling activities in a manner

whereby the Unitholders would have income tax deductions in the 2016 tax year for up to 85% to 90% of their

subscription price of $100,000 per Unit. Note, however, that a Unitholder's IDC deduction for 2016 or 2017 will

ultimately depend upon the prepayment of drilling and completion costs to the operator by the end of the tax year

that the deduction is desired and that the Partnership's drilling activities commence by the end of the first quarter

of the subsequent year. For example for a 2016 deduction, Drilling costs must be prepaid by December 31, 2016

and drilling must begin by March 31, 2017. To the extent that such conditions are satisfied later than the dates

mentioned above, your IDC deductions could possibly be deferred into later tax years as a result of the same

conditions.

Depletion Allowance – Investment may be entitled to a deduction for depletion with respect to their share of the

gross income of the program, subject to the limitations and qualifications discussed herein. 15% of the gross

partnership income off the wells would not be taxed. This partially shelters cash flow for the unitholders within the

partnership and occurs because wells are seen as a finite resource due to IRS rules on percentage/cost depletion

allowance.

TAX CONSIDERATIONS

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ABBREVATIONS:

EUR stands for Estimated Ultimate Recovery (the projected total amount of hydrocarbons that are expected to be recovered per well)

IP stands for Initial Production, the measurement of an oil well's production at the beginning, over time oil production will decline.

MD stands for Measured Depth of well bore.

NRI stands for Net Revenue Interest (After royalty owners are paid) an industry term that means the amount received by a working interest owner from the sale of oil or gas from a well after the payment of royalties and overriding royalties but before the payment of operating costs for the well.

NGL stands for Natural Gas Liquids.

PPM stands for Private Placement.

TVD stands for Total Vertical Depth or True Vertical Depth of well bore which is the vertical distance from a point in the well (usually the final depth at the end or “toe” of the well bore to the surface. For a vertical well the TVD is the total length of the well bore. The term is usually applied only to horizontal wells to identify how deep the well is but not how long the well bore is.

TERMS:

The term "accredited investor" means a person meeting the requirements for accredited investor status in Rule 501 of Regulation D under the Securities Act.

"AFE" stands for "authorization for expenditure” and means the estimated projected costs for drilling a well to a specified casing point, completing the well in one or more zones with specified treatment techniques, furnishing all labor, well equipment and gathering facilities necessary to produce the wells to sales.

“Anticline” is a fold of rock layers that slope downward on both sides of a common crest.

“Barrel.” A barrel of crude oil is 42 gallons.

The term "development well" generally means an oil or gas well drilled within the area of known oil or gas reservoirs to the depth of stratigraphic horizons known to be productive, and may also include a well drilled in an area adjacent or contiguous to a proration unit having existing production and drilled to the same formations from which production is or was obtained from that proration unit.

The term "formation" means a stratum of rock that is recognizable from adjacent strata consisting mainly of a certain type of sedimentary rock or combination of rock types with a thickness that may range from less than two feet to hundreds of feet.

"Drilco Partnership" means an affiliated special purpose general partnership that Drilco may form with its founders and other long-term investors to fund part of its Program contributions in exchange for a proportionate interest in the Drilco Position in the Program Wells, exclusive of any management or operating rights or obligations of Drilco under the Program Agreements.

"Drilco Position" means Drilco's 25% Proportionate Share of the Program Position in the Program Wells, subject to adjustment in accordance with the True-Up Account maintained under the Prospect Assignment and upon vesting of the Drilco Reversionary Interest under the Program Agreements.

"Drilco Reversionary Interest" means the reversionary working interest to be earned by Drilco in the Program Wells after Payout, as determined under the Program Agreements.

The term "horizontal well" means a well drilled with directional drilling techniques to create one or more lateral legs designed to optimize fracture intersection and EURs.

TERMS AND DEFINITIONS

18

"Intangible Drilling Costs" or "IDC" means expenditures incurred for items having no salvage value and for labor, fuel, repairs, hauling and supplies used in (i) preparing the surface prior to drilling oil and gas wells, (ii) drilling, treating and cleaning oil and gas wells and (iii) preparing oil and gas wells for production, all within the meaning of Treasury Regulation section 1.612-4(a).

"Location Fee" means the non-recurring fee charged by Drilco to the Program for its interest in the Prospects at the rate $80,000 per wellsite. for an aggregate of $800,000 if the Private Placement is fully subscribed, payable 75% by the Partnersh ips and 25% by Drilco. Pursuant to COPAS accounting guidelines, the Location Fee charged by Drilco is typical and customary with those charged by other companies in the Appalachian Basin for leasing rights.

“Logging” is the standard method of evaluating zones potentially bearing petroleum. After drilling is completed, electrical and nuclear detection equipment is lowered into the well. This test graphically displays parameters such as zone depth, poro sity, hydrocarbon content, quantitative and qualitative formation development.

"Management Fee" means, pursuant to COPAS accounting guidelines, the non-recurring management fee charged by Drilco to the Program at the rate of $40,000 per well, for an aggregate of $800,000 if the Private Placement is fully subscri bed, payable 75% by the Partnerships and 25% by Drilco.

“Mud logging” is the creation of a detailed record (well log) of a wellbore by examining the cuttings of rock brought to the surface by the circulating drilling medium to develop a map and analyze the zones potentially bearing petroleum and is done as drilling the well bore is progressing.

"Payout" means the point when each Unitholder has received cumulative distributions from the Partnerships aggregating 110% of the Unit subscription price or $110,000 per Unit.

“Payzone” refers to the rock in which oil and gas are found in exploitable quantities.

"Private Placement" means the private placement of Units by the Partnership in accordance with the PPM and Program Agreements.

"PUD" stands for proved undeveloped, which is a portion of proved reserves that can be expected to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively minor expenditure is required for completion.

The term "reservoir" means an underground formation containing a natural accumulation of oil or gas that is confined by impermeable rock or water barriers or is separate from other reservoirs and is sufficiently porous and permeable for production of the accumulated oil or gas.

"True-Up Account" means the account to be maintained by Drilco under the Prospect Assignment, providing a mechanism to settle variations between the AFE cost-plus obligations for the Program Wells and their actual drilling and completion costs, any variations between the anticipated and actual mix of horizontal and vertical Program Wells or any exercise of Third-Party Rights as described under the captions "Summary of the Prospect Assignment — True-Up Account"

"Unitholder" means the holder of one or more LP Units or GP Units.

The term "working interest" means an interest in an oil and gas leasehold or well entitling the holder to receive a specified percentage of the sale proceeds from oil or gas produced from the leasehold or well and obligating the holder to be ar a specified percentage of the costs of drilling, completing and operating the well.

19

Contact Information for Drilco Oil and Gas. To request a copy of DRILCO 2016 1H DRILLING PROGRAM CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM please contact Drilco Oil and Gas by calling Drilco’s office from 9:00 AM to 5:00 PM Monday thru Friday EST (excluding holidays) at (304) 354-9516 or fax your request to (304) 354-6809. Requests can be made online thru Drilco’s website: http://www.drilcooilgas.com/offers.html or http://www.drilcooilgas.com/contact.html and requests can always be made by mailing your contact information including your phone number and address and a note of your interest to:

Drilco Oil and Gas P.O. BOX 385 Grantsville, WV 26147.

Also please visit our website at www.drilcooilgas.com

PROPOSED

PAD 5 Horizontal #5

Vertical #5

HOW TO CONTACT DRILCO

http://www.drilcooilgas.com/offers.html

http://www.drilcooilgas.com/contact.html

http://www.drilcooilgas.com/

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