NEW CENTURY PIPELINE

After 90 days of operation (11/10/8 startup date) we have finally got the mechanical part of the plant operating with some confidence. In December we had a run time of 75% while production levels were around 200 mcf per day. In January we had a run time of 90% with an average daily volume of 300 mcf per day. The first 9 days of February we have seen a 90% run time and volumes of 400+ mcf per day. We have not added a new well to the plant sense mid January. The completion schedule will resume on 2/11/09. We are hoping to have production levels to 500mcf per day by March 2009, and 600 mcf per day by April 2009. The goal at this point is to get to 600 mcf per day and maintain it untill the thaw is over.

Phase 2 Discharge upgrade is in the final steps of engineering and pricing. This pipeline is necessary to create a year round market to NFG. The pipe we are currently going into has a seasonal market that will be greatly reduced from May or June, until fall. It is imperative that we have the line in operation by May. This will eliminate the need to shutdown our production do to lack of market.

The completion schedule has been moved up to 2 wells per week for the remainder of the winter. We would like to have 10 more wells on line before the spring break up. The wells are performing better than anticipated so this should give us plenty of gas at the plant through the spring thaw, when we can't complete wells.

Aiello Bros. Oil and Gas Inc.