ReoStar Energy Initiates New Drills at Barnett Shale, Injections at Corsica

Permian Basin: Basins of Texas
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ReoStar Energy completed its second "cluster" of wells in Barnett Shale in December 2007. This cluster was comprised of 4 new wells that were drilled and completed during the quarter and 5 older wells that were re-completed. All nine of the wells were fractured in December within a ten-day period using high pressure stimulation. At the end of the year, all the new drills were in flow-back and were brought online during January and early February, 2008. During the fourth quarter, we expect to drill and complete a cluster of 5 new wells and 4 older wells (re-completions). The company also expects to begin drilling two wells which will be part of a cluster that will be completed during the first quarter of the next fiscal year. All wells within a cluster will be fractured using high pressure stimulation within a seven-day period and be brought online simultaneously. The initial result of the new wells has produced modest improvements near term on production of the wells brought online, while mitigating the production decline curve.

ReoStar Energy began injecting a polymer-surfactant solution into the pilot area in Corsicana in mid-June as discussed in previous production reports. During the third quarter REOS injected a total of approximately 600 barrels of the polymer-surfactant solution in 6 injection wells per day or over 200,000 barrels to date. During the quarter pressures have been increasing resulting in incremental increases in production in our producer wells. REOS will continue to closely monitor the injection process of the current pilot and expects to see continued improvements in results during the remainder of the year.

The Company has permitted and will commence drilling the next 13 wells for the second stage of the pilot project. The company anticipates the start of drilling the wells in mid-February. It is also planning to drill 3 deeper exploratory wells in their core acreage in the next 60 days. Two wells will be drilled in the Pecan Gap formation and the third well will be drilled in the Glen Rose formation to evaluate the prospects of potential oil reserves and future production.


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