Avalon Drills Initial Gas Well On Waters Lease

Avalon Oil & Gas, Inc. announced the company is nearing the target drilling depth of 11,000 feet on the Waters #3-328 gas well in Lipscomb County, Texas. This well will test the Lower Morrow sands. The lower Morrow "D" sand is a highly charged hydrocarbon reservoir as is evidenced by several prolific wells in the immediate vicinity.

Avalon acquired a five percent (5%) working interest in the 1,280 acre Waters prospect in December 2007. Two additional drilling locations have been identified and mapped on this leasehold. The first well is being drilled between two prolific gas wells that have produced over 0.5 billion cubic feet (BCF) of natural gas in the two years they have been in production. Estimated recoverable reserves from the #3-328 Waters well are projected to exceed 1.3 BCF of gas.

"We are very encouraged by the progress to date on the #3-328 Waters and look forward to reaching total depth and completing this well," commented Avalon's President and CEO, Kent A. Rodriguez.

Amarillo Exploration, operator of the Waters Lease, has drilled numerous wells in the vicinity of the Waters #3-328 gas well. "This well is a direct offset to the Kelln #1 well which was drilled in August 2005, and is producing from the lower Morrow and Squaw Belly sand intervals," said Mr. Rodriguez. "The target pay zones of the Waters #3-328 include the Lower Morrow, Middle Morrow (Squaw Belly) and the Cleveland," he added. Upland Resources, Inc. also has a producing gas well that is an offset well to the Waters #3-328. Cumulative production through July 2007 on the Kelln-#1 well was 0.462 BCFG and 464 BO (barrels of oil). Daily production is 672 MCFD and 1 BOPD.

The lower Morrow "D" sand is the primary drilling target, along with the Squaw Belly "5" sand interval. The Cleveland formation is the secondary drilling target. The well is situated along the southern boundary of the Cleveland Lipscomb SW field. The Waters #3-328 Well directly offsets wells that have produced from 0.075 to 0.963 BCFG.

The lower Morrow sands were deposited as a result of an advancing shoreline system that encroached generally in a northward direction onto an exposed Mississippian surface. These lower Morrow sand systems represent a variety of shoreline facies that trend northwest to southeast. The Squaw Belly sands, also referred to as the Middle Morrow interval, may represent a deltaic sequence deposited as the transition facies between a marine influenced lower Morrow sequence and the overlying non-marine influenced upper Morrow sequence. The lower and middle Morrow intervals are structurally located along the east dipping flank of a southeast plunging nose that is seen repeated at the Mississippian, base of Squaw Belly "5", and top of Squaw Belly markers.

The Waters #3-328 well was initially spudded in late December 2007, and by mid-January 2008, drilling had reached a total depth of 10,860 feet. Samples were taken and the well was prepared to be logged and tested for completion. Drilling was suspended at that time when the last string of drill pipe fell into the hole and subsequent attempts to retrieve the drill pipe were unsuccessful.

Upon review of the well's drilling history, positive samples and log results, the operating partners determined that the well should be completed for production. The partners also decided to move the location and re-drill the well approximately 100 feet away from the initial location. Drilling commenced at the new location on March 21st and is expected to reach total depth by mid-April.


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