Admiral Bay Completes First of Nine Wells at Mound Valley, Kansas

Admiral Bay Resources says the first of nine wells has been drilled at the Company's Mound Valley CBM project in Labette County, Kansas. The Froebe 14-32 well has been drilled and has had casing run. The well encountered several coal seams including the Riverton, all of which yielded gas shows. The rig has now been moved to the Vareraka 10-31 well and drilling began this morning. In addition to these nine new wells, the project also has four existing wells that currently have a small amount of production. These existing wells will be reworked utilizing more modern completion techniques, which should result in increased production.

Shiloh Project Compressor/Tap Facility

At the Shiloh Project, the new compressor facility is nearing completion. Admiral Bay is currently awaiting completion of the tap connection to Southern Star Central Gas Pipeline, Inc.'s major pipeline. This connection to the main pipeline is anticipated to be finished over the next few days.

Admiral Bay presently has 17 wells flowing gas at the project. A further 13 wells are ready to sell gas when the pipeline capacity increase has been completed. There is also an additional six wells awaiting fracing that have already been hooked into the new gathering system. Gas produced at the project is currently being sold into a third party sales line that is constraining production to approximately 300 MCFGPD, due to line limitations. Production is also being constrained by limitations on water disposal, due to pipe size. The Company has recently completed the drilling of an additional water disposal well at its new tap and compressor site. This new disposal well has significantly increased capacity and will allow the project to handle up to 5,000 bbls of water per day.

Management anticipates production at the Shiloh project will increase to over 1,000 MCFGPD, once this new facility is operational and these additional wells are opened to the sales line.


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