Pegasi Ramps Reserves in Tx.

Pegasi released net oil and gas reserves as of December 31, 2010.

The Company is reporting total net proved reserves of 3,024,333 Barrels of Oil Equivalent (BOE), net probable reserves of 610,339 BOE and net possible reserves of 10,620,722 BOE as of 12/31/2010. A 6,000 CUFT ratio to one barrel of oil is used to equate BCF to BOE. In addition, Pegasi has internally estimated its unrisked total Contingent Resource potential of 77,130,240 BOE bringing the total unrisked plus risked reserve to 91,461,463 BOE. The contingent resource evaluation was performed by utilizing the data presented in the Engineering Study and Economic Analysis for the Cass and Marion Development Program prepared by James E. Smith and Associates.

All of the reported oil and gas reserves are from the Company's Cornerstone project located in Marion and Cass counties in northeast Texas and are based on independent engineering by James E. Smith and Associates. The Company has a 40% to 80% working interest in the project.

The area of the Cornerstone Project has produced over 400 million barrels of oil and more than 2.3 trillion cubic feet of gas. Pegasi is focused on applying new horizontal drilling and multistage frac technology to recover substantial additional oil and gas reserves which remain in place.