Shay

Refugio County, Texas

Pipeline Resources, Inc. acquired a leasehold interest in the Shay prospect next to the Mission River lease we are currently developing. The Shay prospect is located immediately adjacent to the southeast corner of the Townsite of Refugio in the Old Refugio Field area of Refugio County, Texas. This area is in a portion of the Frio Trend unequaled for its prolific oil and gas production.

Previous exploration in the Old Refugio Field delineated a geologic setting considered ideal for additional infield drilling. The field has an excellent structural setting and produced over 19 million barrels of oil (MMBO) and 47 billion cubic feet (Bcf) of gas from 25+ Frio reservoirs. Most production occurred from several intervals within the shallow Frio section which, although prolific, are extremely complex stratigraphically. Detailed mapping and review of production records suggest many reservoirs were not fully exploited and substantial infield reserve growth potential exists. The planned infield development program is expected to encounter a combination of new reservoirs, thin bypassed reservoirs, incompletely drained pressure depletion reservoirs and water drive reservoirs with additional "attic" reserves or untapped compartments.

Pipeline Resources successfully drilled the first test well on this property in the fall of 2005. The Shay #1 was re-completed in September, 2008. Monthly production exceeds 200 BO and 5 million cubic feet (MMcf).