As of December 31, 2008, Aurora Oil & Gas Corp.’s leasehold acres were 1,164,460 (651,389 net) which represent a 9% decrease over our Dec. 31, 2007 net acres.

This decrease primarily resulted from the sale of their Oak Tree Project acreage of 37,325 (33,219 net) acres in September 2008 which accounted for all their acreage within the Woodford shale play located in Oklahoma. Remaining leasehold acres are included in the following plays: 286,390 (134,003 net) leasehold acres in the Antrim shale play, 787,595 (449,183 net) acres in the New Albany shale play, and 90,475 (68,203 net) acres in the Other play areas.

The New Albany shale provided a modest increase in proved reserves during the year, adding a net 1.0 Bcfe, which is a 4% increase over the 25 Bcfe reported on Dec. 31, 2007. The Antrim shale proved reserves were reduced by a net 69.3 Bcfe. Their Antrim shale proved reserves have historically been determined by our third party reserve engineers using type curves derived from a combination of reservoir simulation and production performance from nearby more mature Antrim shale units operated by others. At the end of 2007, the type curves were modified to conform to our historical production history to date, but we had an insufficient amount of production on our working interest units to significantly alter the type curves. Now that we have sufficient data to develop decline curves for our wells, our engineers have based their projections of future production volumes on actual historical data from our own wells instead of representative data from other wells in the Antrim play. Not only did this affect the proved developed producing reserves, but the type curves for proved undeveloped reserves were modified accordingly. This resulted in type curves projecting lower reserves, and certain future drilling locations with proved undeveloped reserves were eliminated due to unacceptable economics. We estimate that approximately 41.3 bcfe of the reduction in Antrim shale proved reserves is attributable to this change. Oil and natural gas production for 2008 was 3,044,112 mcfe, or a 5% decrease over the 3,207,155 mcfe produced in 2007. During 2008, production continued to be hampered by wells undergoing resource assessment and dewatering in the Antrim along with damages caused by a fire in our South Knox project.

During 2008, the company implemented a well enhancement program on operated Antrim shale properties to address decline in production. They completed well enhancement activities on 74 wells and experienced an approximate one to two days stoppage in production per well to complete the well enhancement activities. The company believes that maximizing water production from all operated Antrim shale wells, regardless of their individual economic impact, is necessary to maximize gas production from the projects as a whole. Therefore, they have initiated a renewed well enhancement program in February 2009 that emphasizes measures that will increase water production. The program will be implemented in three phases throughout 2009 with the first phase incorporating the Hudson 19, Hudson 34, Hudson SW and Hudson West Units. Average daily production for 2008 was 8,317 Mcfe/d compared to 8,787 Mcfe/d in 2007. Daily production for operated properties was 5,259 Mcfe and 6,397 Mcfe for 2008 and 2007, respectively. Daily production for non-operated properties was 3,058 and 2,390 Mcfe for 2008 and 2007, respectively.

Effective September 15, 2008, the company closed on the sale to Presidium Energy, LC ("Presidium") of all their membership interest in a wholly owned subsidiary, AOK Energy, LLC ("AOK"). On October 29, 2008, they entered into a farmout arrangement with Atlas Energy Resource, LLC ("Atlas") to farm out their 64.43% interest in undeveloped acreage in the Wabash project. The Wabash project is a 121,702 gross acre New Albany shale project located in the Indiana counties of Clay, Greene, Owen, and Sullivan. Under the terms of the farmout arrangement Atlas must (1) drill at least 20 horizontal wells on an annual basis, (2) pay a well site fee, (3) accept responsibility for any lease obligations, including payments for lease extensions, (4) provide us with an overriding royalty interest on production, and (5) allow us to participate as a working interest owner, if requested, in a 25% working interest in any leases pooled into a drilling unit. As of the filing of this Form 10-K, no drilling activities have commenced under the farmout arrangement.