Arsenal Spuds Brenlee Well, Posts 2011 Capex

Testing of the Three Forks formation in the Jerol well (12.5% WI) at Lindahl, North Dakota, has been completed. The well flowed at 1330 bbls/d of oil over a 24 hour test period and has been placed on production. At Stanley North Dakota, Arsenal as operator has spud the Brenlee (42% WI) one mile horizontal Bakken well. After the Brenlee well the drilling rig will move directly to the Amy Elizabeth (62% WI) two mile horizontal Bakken location. Also at Stanley, EOG has spud the Burke 31-20 (31% WI) well targeting the Bakken.

At Rennie Lake, in Burke County North Dakota, an area operator has released a test rate of 690 bbls/d of oil from a Bakken horizontal about 4 miles south of Arsenal's 2,500 net acres. A second well, one mile north of Arsenal's acreage has been on production for 4 months averaging 120 bbls/d. Arsenal intends to develop its Rennie Lake property after Stanley and Lindahl have been drilled out on 640 acres which will likely be sometime in 2012.

At Evi, in Northern Alberta, Arsenal has a 10 well drilling program underway. The first well, 02/4-7 (50% WI), has swab tested at 350 bbls/d from the Granite Wash. The second well, 02/9-6 (50% WI), has swab tested at 400 bbls/d from the Gilwood. The third well, 5-1 is drilling.

Arsenal's Board of Directors has approved the capital budget for 2011. Arsenal expects to spend $50 million of capital. Drilling plans include 10 gross (4.1 net) Bakken wells in North Dakota, 9 gross (7 net) wells in Evi, and 6 gross (6 net) wells in Arsenals medium gravity eastern Alberta properties. Arsenal forecasts a production exit rate of 3300 Boe/d at the end of 2011 while maintaining the company's targeted debt to cash flow ratio of 1:1.