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Burleson Energy announces status of the T2H horizontal development well

Tuesday, Dec 18, 2012

Burleson Energy (BUR) provides the following update on the status of the Truchard #2 horizontal well (T2H) as at 17 December 2012 (Texas time).

Over the past month, work to identify the source of high water production from the T2H well, and remediate the problem, has continued. The operator AKG has begun a range of tests and activities that will continue into the first quarter of 2013. The process involves lengthy production periods during which the wet gas, condensate, water production, water salinity and pressure gradients are monitored over time.

The T2H well is currently producing from frac sleeves 1 to 5, with frac sleeve 6 being closed. All production from this test is sold. Solid progress is being made, with condensate and gas production gradually increasing and water production gradually declining. Currently, the well is producing at rates of approximately 1,500 mcf of wet gas per day and 60 barrels of condensate per day and disposing of some 1,400 barrels of water per day.

Applying current commodity prices to these production rates, results in gross revenue from the well of approximately US$355,000 per month, prior to operating costs, production taxes and royalty interests. The cost of remediation and testing activities at the T2H well is expected to be approximately US$1.6m (US$0.8m net cost to Burleson) over the previously announced US$6.3m cost to drill, frac and complete the well. The cost of this work will be somewhat offset by the sales of wet gas and condensate produced during the testing period, as described above.

Burleson Energy Managing Director Michael Sandy commented “Before another horizontal well is drilled on the Heintschel field, or the partners consider moving into field development, the source of excess water production in T2H needs to be determined and controlled. Thus the current activity and resultant extra expenditure are necessary to progress the commercialisation of the field. Solid revenue from the T2H well, even during relatively depressed production testing, indicates the economic potential of the Heintschel field and therefore justifies this extra investment”

Burleson’s cash balance prior to incurring the additional development expenditure described above is approximately $2.9m. Therefore, the company is able to finance its share of these costs without any

need to access external sources.

Source: Burleson Energy

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