Implementation of the work program of Budget Period 2 of the East Binger Unit (''EBU'') DOE Project is progressing and nearing completion. EBU 63-2H has been drilled, completed, and brought on line. This is the second of three horizontal wells planned for this Budget Period, but based on the costs and performances to date of all new wells, could be the last. It will take some time to evaluate their impact on sweep and ultimate recovery. In addition to the drilling of new wells, the project also includes conversions of five wells from producers to injectors. Three wells were previously converted, and a fourth, EBU 37-3H, was prepared for conversion at the end of this reporting period. The fifth will require an expensive workover and will be re-evaluated. Project response to the various projects continues to be very favorable. Gas injection into the pilot area has increased from 4.0 MMscf/d prior to development to an average 7.3 MMscf/d in this reporting period, while gas production has actually decreased from 4.1 MMscf/d to 3.9 MMscf/d. The nitrogen content of produced gas has dropped from 58% to 52%. This has reduced the nitrogen recycle within the pilot area from 60% to 27%. Meanwhile, pilot area oil production has increased, from 300 bpd prior to development to over 600 bpd in September 2003. The pilot area oil rate will fall off as EBU 63-2H, which began producing new formation oil on September 6, declines to a stable rate.