By the close of fiscal 2008, Southern Star Energy Inc. had drilled six wells, including five successful Cotton Valley formation test wells, all of which are producing. We have also laid a 15,000 foot gathering system and central processing and metering facility to service the five producers. Based on the satisfactory results of deep Cotton Valley wells, the company has embarked on its 2009 program to continue to drill additional wells to define the core productive outlines of the Cotton Valley formation within their acreage. An additional critical objective of this program is to assess the presence and potential of the Haynesville shale within its acreage position.

Each of the company's eight Cotton Valley wells has similar log characteristics, and six of these wells are currently flowing into sales lines. The sixth well is awaiting a pipeline connection. Both the A.S. Burt 20-1 and the Atkins-Lincoln 17-2 will be completed in the Haynesville shale, pending thorough analysis and completion design.

Based on the petrophysical results over the Haynesville shale intervals in the Atkins-Lincoln 17-2 and the A.S. Burt 20-1 wells, the company revised its near term strategy to focus on exploiting these discoveries and follow up with a third location to further define the Haynesville potential. This caused and will cause our near-term attention to be re-directed to the Haynesville completions as well as increasing our pipeline capacity in the field. This program will have the additional benefit of continuing to secure our leasehold position while allowing us to defer Cotton Valley development plans until oil and natural gas prices improve.

On February 19, 2009, the company spud its third Haynesville delineation well, the Boyce Pate 16-1. This well successfully encountered its Cotton Valley target, logging 66 ft. of net gas pay in the Davis Sand intervals before the company drilled ahead to further evaluate the well's Haynesville potential. The Boyce Pate 16-1 well reached total depth of 11,200 ft. on March 21, 2009. Wireline logging and mud log shows indicate the Boyce Pate 16-1 well encountered 177 ft. of net porous Haynesville shale over a gross interval of 395 ft.

The companies 5,400-acre Sentell Field has the potential for about 35 Cotton Valley and 35 Haynesville wells positioned on 160-acre spacing. Numerous vertical and horizontal wells have been drilled, logged and put into production from the Haynesville formation within a 30-mile radius of our acreage in the Sentell Field. However, until theydetermine the extent of the productive limits of the project, they will not know the full extent of development costs to bring the acreage to production. The company intend sto complete step-out drilling to extend the productive limits of acreage. The company estimate s their exploration costs for the remainder of the fiscal year will be approximately $840,000, consisting of concluding drilling operations on the Boyce Pate 16-1, additional stimulation work on certain Cotton Valley wells and infrastructure improvements.