Custer 1H Latest Update
Investing Partners,
I am writing to provide a comprehensive update on the Custer 1H well and our ongoing efforts regarding the Custer County operations.
Formal Removal Notice Sent to Notting Hill Energy
On June 25, 2026, formal legal notice was served via McAfee & Taft on behalf of 94.14% of the Working Interest Owners (exceeding the required majority under Article V.B.4 of the JOA) to remove Notting Hill Energy, LLC as Operator.
The primary grounds for removal include:
- Undisclosed Affiliate Violation: Notting Hill utilized an undisclosed affiliate, Great Plains Gas Compression, which billed the Joint Account over $217,000.00 from September 2024 to June 2025 at above-market rates without required Non-Operator approval.
- Systemic Mismanagement & Overcharging: Uncovered through a formal contract compliance review, including improper netting, inflated charges, and withholding requested accounting information during the audit.
Audit Findings & Financial Recovery ($462,428.13 + TBD)
The official Joint Interest Billing (JIB) Audit Report (covering January 2023 – June 2025) performed by W.A. Waterman & Co. was completed on June 24, 2026. The audit revealed total credits due to the Joint Account of $462,428.13 (plus additional TBD amounts), broken down across six key exceptions:
- Exception 1 (Casing Reconciliation & Pricing): $228,901.93 due for surplus/overcharged 5.5" casing and 2022-vs-2024 COPAS/CEPS market price differentials. (Note: Notting Hill previously credited $125,892.42 on the Oct 2025 JIB, leaving $103,009.51 in additional pricing credits pending).
- Exception 2 (7.625" Casing Pricing): $117,836.80 due for miscoded casing priced at 2022 rates rather than the lower 2024 COPAS market value.
- Exception 3 (10.75" Casing Pricing): $27,217.12 due for miscoded liner/casing pricing differentials.
- Exception 4 (Unallowable Engineering Retainers): $61,650.00 due for off-site engineering retainer fees (John Prejean / Tres Management) that belong under fixed overhead rather than direct joint charges.
- Exception 5 (Unallowable Employee Labor): $26,822.28 due for off-site administrative/office labor charges (Chris Crain) that fall under fixed overhead.
- Exception 6 (Undisclosed Affiliate Charges): TBD credit recovery pending for unapproved charges from Great Plains Gas Compression.
Based on our 40% interest, we are pursuing our full proportionate share of these recoveries. As is typical when recovering funds from a removed operator, we anticipate resistance/delay in receiving direct checks, but we are aggressively pursuing recovery through legal and accounting channels.
Transition to Successor Operator: Hadaway Consulting & Engineering
The Non-Operators have officially designated Hadaway Consulting and Engineering, LLC (Canadian, TX) as the successor operator.
Transition Schedule: Notting Hill has been requested to immediately transfer all well files, books, records, and permits. The official operational takeover is scheduled for the first week of August.
Pending Workover & AFE Voting Status
A workover is currently needed on the Custer 1H to replace/swap out the compressor/generator.
Voting Strategy: Majority working interest owners are deliberately holding off on voting for or approving the AFE while Notting Hill/Terrain remains in control.
Next Steps: The owners agree that the AFE should be reviewed and executed under Hadaway’s leadership once they officially assume operations next week. This prevents Notting Hill/Terrain from unnecessarily inflating or squeezing extra funds out of the workover before departing.
We will keep you updated as Hadaway assumes control next week and the final handover progresses.
Please reach out if you have any questions.
Frank Seidler
President
