Fellows Energy Completes Option Under Exploration Agreement

Fellows Energy has completed its option under the Exploration Services Funding Agreement with Thomasson Partner Associates, Inc. of Denver, Colorado under which it will continue with project evaluation and acquisitions. Fellows has the first right to projects generated under that agreement, with The Houston Exploration Company (NYSE: THX) having the option to join with Fellows on a 50% basis on projects selected. Projects recently acquired by Fellows include projects such as the Bacaroo Project in Colorado, the Gordon Creek project in Utah, and the Carter Creek project in Wyoming.

The agreement calls for TPA to present to Fellows an average of eight (8) projects per year with an area of interest of 10,000 to 80,000 acres per project with a reasonable potential of at least two hundred (200) billion cubic feet of natural gas reserves (200 BCF) or twenty (20) million barrels of oil reserves (20 MMBO). Fellows has the right under the agreement to acquire a 50% interest in each project presented, with the other 50% to be offered either to The Houston Exploration Company or another major industry partner.

Fellows believes the Bacaroo Project represents a low risk opportunity to establish conventional oil and gas production through inexpensive drilling in areas of established production, while other projects being reviewed for acquisition offer longer term, larger potential exploration opportunities in producing areas in the overthrust geology of the Rocky Mountains. As new projects are acquired, Fellows will add diversity to the over 240,000 acres of coal bed methane and conventional oil and gas projects it has previously optioned. Fellows has undertaken drilling on its Overthrust coal bed methane project and is moving forward with plans for development of its other projects, keeping pace with its plans to establish rapid growth.

Fellows president George Young said, "The Thomasson agreement is a major strategic arrangement that provides us with access to some of the most experienced oil and gas exploration geologists in the region and to projects and concepts nurtured by that expertise. We believe this gives us a great advantage in creating value through project identification and acquisition. We have a number of additional quality exploration projects under review at the present time."