Index Oil & Gas Begins Production at Schroeder Gas Unit 1

Index Oil and Gas began production on its recent discovery, Schroeder Gas Unit 1 on the Habanero prospect in the Frio sandstone in Goliad County, Texas, on August 31 at an initial rate of 300 mcfpd (thousand cubic feet per day) on a 7/64" choke. Index has a 37.5% Working Interest ("WI") and 28.125% Net Revenue Interest ("NRI") in the well and corresponding 80 acre gas unit.

Hawkins 1 is also a Frio sandstone discovery in Matagorda County, Texas. The well is awaiting hook-up to the local gas pipeline infrastructure. Excessive rainfall and dependence upon operator activity on adjacent acreage have delayed first production. These issues are being resolved. First production is expected during fourth quarter 2007 or sooner. Index has a 12.5% WI and 10.010634% NRI in the well and the corresponding 160 acre gas unit.


Ilse 1, drilled in search of high impact Middle Wilcox pay sands, reached a total depth of 17,000 feet and the drill rig was released on 4 April 2007. The well took longer to drill and test because of the use of a new rig, which experienced excessive down time for repairs, rainfall, and well control problems due to high pressure and carried into FY 2008. These issues resulted in a cost over-run to the original estimate. A Middle Wilcox zone was perforated between 16,760 feet and 16,784 feet, hydraulically fractured, and, on 5 June 2007, flow tested. The test failed to produce gas in commercial quantities. Potential gas zones up-hole are currently being evaluated by the participants for testing. Index has a 10% WI and an 8% WI after payout ("APO") of the prospect. Index has a 6% NRI APO.

Index recently reported ongoing operations on the George Cason 1, Shadyside 1, and Outlar 1 high impact, FY 2008 exploration wells in Nacogdoches County, Texas, St Mary Parish Louisiana, and Wharton County, Texas, respectively. See recent Index press releases for details. All three wells are progressing as planned in terms of depth verses number of days drilling and cumulative cost.


Index continues to manage its exploration business using industry best practices and a balanced portfolio approach with increasing emphasis on high-impact wells.

Wells awaiting spud in the current fiscal year are the low-risk Cow Trap production well in Brazoria County, Texas; the high-impact well in the Supple Jack Creek area of Lavaca County, Texas; and the very high-impact well in the Alligator Bayou area of Matagorda County, Texas.

In Kansas, Index has signed 14 well AFEs ("Authorizations for Expenditure") for low-risk oil prospects in Stafford and Barton Counties, Kansas. It is anticipated that drilling in Kansas will begin in third quarter 2007 with up to 14 wells to be drilled at a rate of approximately two wells per month. The number of wells to be drilled in Kansas is dependent upon oil price and results of the early wells to be drilled.

Lyndon West, CEO of Index Oil and Gas, stated, "This is the highest level of activity the Company has seen to date. Index management believes it has assembled a well balanced portfolio of risk-mitigated prospects that will potentially impact the Company very positively as our fiscal year 2008 progresses."


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