Howard & Borden County, Texas Ground Zero Prospect Howard & Borden County, Texas

Prospect Overview Midland Basin/Eastern Shelf Transition area – Howard & Borden Co. TX - 5 zones. 2 primary horizontal targets: Wolfcamp & Lower Leonard carbonate. Cline/Penn development South & East. 10,280 +/- acres on 3 ranches. 160 acre horizontal spacing. Room for 64 wells. 26–52 Million barrels of oil recoverable using 4% recovery factor. Clear Fork & other formations could be developed vertically on 40’s. Additional acreage can be acquired (10,000 acres+/-) 3 Primary Permian source shales (Woodford, Penn, Wolfcamp) underlie acreage and sourced large, nearby fields (Reinicke, Vealmoor, Vincent, etc) Repeatable, Multi zone, Hybrid Resource Play. Calculated Horizontal Reserves of 600-800 MBO per 160 acres in 2 zones. Proven consistent over large area (130+ miles). Analog wells 800-2000 BOPD. Thick sections of hydrocarbon saturation. Wolfcamp section is 750’ thick. Leonard 250’ thick, 2 Finger–Cline 300’ thick. Halliburton Shale Logs indicate almost 50% of column is high TOC, kerogen rich source rock Correlative analog 120 miles away EOG, Approach, El Paso, Devon, Range & Pioneer. The recently unveiled 2 Finger Shale(Cline) of Fisher County is present and productive in area. The 2500’ thick Clearfork, Leonard, Wolfcamp(WolfFork) column is analogous to Approach & Three Rivers activity in Irion & Crockett County Horizontals & multi stage fracturing provide massive increase in volume of rock connected to wellbore, thus providing economic, long term production of very low perm source rock Comparable in age & targets to very active Delaware Basin Extensive E-Log review, Compelling Mud Log Data, proof of hydrocarbons., movable 40 gravity oil 1500 BTU gas, heavy liquids. Excellent pipeline infrastructure. Ample water supplies Apache, Chesapeake, SM Energy, Laredo, Nadel & Gussman and others actively leasing in vicinity

Wolfcamp 750’ thick lime, shale & sand mix. Depth 6400’-7200’ Halliburton Shale log analysis show appr 315’ (42%) of column is kerogen rich, 3-5% TOC source rock. Limey, dirty carbonates sandwiched amongst source rock. Shale Log reserve calculations of 400 MBO per 160 acre tract Mud logs exhibit off scale gas increases going thru Wolfcamp. Carb & calc gas bleeding shale, fluorescence Extensive E Log analysis. Mud log characteristics correlate thru out study are and tie to production Collectively, 90% of column has produced in vicinity, with majority being from the “B” section. Newer completions include upper Type curve for 15-18 month vertical producers indicate 15-20 BOPD. Extrapolated by 4X for horizontal, provides economic 60-80 BOPD. Improved (larger) stimulations could provide even better rates. Historical WC producers 5-300 MBOE. One instance, 2’ of perfs cum’d 43,000 BO

Lower Leonard 250’ Thick Shaley, limey & sand mix. Depth 6030’-6280’ Halliburton Shale Log analysis indicate 215’ of column to be kerogen rich, 2-5% TOC source rock. Carbonates sandwiched between dirty, shaley source intervals. EUR’s of 200-400 MBO per 160 acre tracts Mud logs show off scale gas while drilling thru interval with shows. Mud log gas correlates thru out study area & ties to production Several 50-90MBO wells in vicinity. Produces in Vealmoor & Reinecke Multi pay Field Might be excellent, tightly spaced, vertical project utilizing advanced petrophysical analysis & multi stage fracs ----- Meeting Notes (5/16/11 17:14) ----- Bobby Gibson Intro

Other Targets Clear Fork: 3 intervals produce across region. Some high cums, Would Have (3.8+ MMBO), Coahoma, North (600MBO) and several 20-50 MBO fields Cisco/Canyon: Productive thru out region with some very high cum’s 400+MBO/well Cline Shale/2 Finger: Range, Laredo & Apache have horizontals 30 miles South. Apache completing interval near prospect acreage. Presently, 2 Finger acreage to East & SE trading feverishly with recent production tests. Possible Chesapeake/Devon target Strawn: Productive to the East. High cum’s (400+MBO) Mississippi: Produces in region. EOG has Horizontal Miss well, cum 700MM, 11 MBO, 2150 MCFD. Believe Chesapeake/Devon/Apache chasing Horizontal Miss Overall: A very oily petroleum system

Land Position Appr 10,280 acres under 3 ranches Additional 5000-10,000+/- acres available if pursued timely 100% WI - 75% NRI Oldest lease taken Nov 11’ Ample well water for frac operations

Conclusions Major Permian source beds, long term production, high EUR fields within area, High Gravity oil, high BTU gas- Heavy liquids Modern Shale Log analysis provide new insight & pinpoint productive zones Extensive E-log info, compelling, area wide, Mud Log Data Shale Logs indicate 2200’ of liquids rich, porous intervals and recoverable reserves of 4+ MMBO per section – PREMIUM ECONOMICS Improved petrophysical analysis, Core work, fracture identification, MicroSeismic, horizontals and multi stage fracs are breathing new life all across the Permian basin Extrapolated type curve provide for economic horizontal development of prospect Leonardian/Wolfcamp is equivalent to the Avalon/Bone Springs/Wolfcamp of the Delaware Basin. ClearFork/Leonard/Wolfcamp/Penn Analog correlates 120 miles south to EOG/Approach/El Paso/Devon/Range activity Wolfcamp & Penn/Cline both being developed horizontally to the South Relative shallow depth moderates drilling & completion cost. White/Ottawa sand can be utilized. Low HHP Frac Spreads. Est CWC $4.0 MM, possibly decreasing to $3.5MM Acreage Multiplier - Stacked pays offer substantial reserves across acreage block – A Very, very Oily area