Fayetteville Shale Project Detail

The Fayetteville Shale is an unconventional gas reservoir located in the north central part of Arkansas. The play covers well over 5,000 square miles, stretching from Crawford County on the west past Woodruff County on the east. Depth of the shale varies because of folding of the strata, but usually appears between 1,500 and 6,500 feet. Thickness of the shale ranges from 50 feet to 550 feet in some areas. The Fayetteville Shale is Mississippian in age and is the geologic equivalent to the Caney Shale in Oklahoma and the Barnett Shale in North Texas.

As the industry has more experience with drilling and completing the Fayetteville Shale, the play is proving out to be one of the major future gas producers for the United States. Recent production levels are in fact proving the economic viability of the play. One of the acreage leaders in the Fayetteville Shale, Southwestern Energy, through October 19, 2006, had performed 49 slickwater or cross-linked gel fracture stimulation treatments on horizontal wells currently on production. The average initial production test rate for those 49 wells was 1.7 MMcf per day. The average rate for 42 wells that had been on production after 30 days was 1.5 MMcf per day and the average rate for 23 wells that had been on production after 90 days was 1.4 MMcf per day. Horizontal wells recently completed using improved fracture stimulation techniques are displaying shallower initial decline rates, potentially pointing toward higher estimated ultimate recoveries.

The Arkansas Oil & Gas Commission approved statewide field rules in the third quarter designating Fayetteville, Moorefield, and Chattanooga shales as unconventional sources of supply. Each drilling unit consists of 640 acres, and as many as 16 wells are permitted per unit for each formation.

ReoStar has amassed a total of 6,450 acres within the Fayetteville play. Our leasehold is located primarily in Conway, Faulkner, and White counties. As of August 2007, we have not yet drilled any wells on this acreage.

Highlights of the ReoStar’s Fayetteville Shale Position:

• The Fayetteville Shale has many characteristics of the earlier stages of the Barnett Shale both in size and productivity
• Mid-level E&P firms such as XTO, Chesapeake, Maverick and Southwestern have been acquiring acreage in several of the same and neighbouring counties across the fairway or the heart of the play
• Availability of existing infrastructure; several gas gathering systems and interstate gas pipelines, drilling rigs and oilfield service are available
• Our present relationships give us the ability to acquire up to 20,000 acres of high NRI leases (80-85% avg.)
• Based on current reservoir engineering – estimated reserves for a horizontal well are 1.7 Billion Cubic Feet (BCF)
• Historically low exploration risk in tight, gas shale projects
• Recoverable reserves have potential to exceed 180 BCF on a 10,000 acre mineral leasehold