RE: Production statusFrom the MD&A:
Leaf and Stone Joint Venture, Bakken Oil Play, SE Saskatchewan
Pursuant to a joint venture agreement dated June 16, 2008, the Company entered into an agreement with
Leaf & Stone Resonance Services Ltd. (“L&S”) on the initial development of three wells. The oil and gas
leases are located in the Bakken Formation, in southeast Saskatchewan. The Company agreed to
become the operator with other technical and mineral rights being contributed by L&S. If the cost of a well
exceeds $250,000 the Company can recover the excess from future revenues from that well before being
shared revenues and costs equally.
At December 31, 2009, the Company has incurred $1,540,159 costs, which are included in undeveloped
oil and gas properties. Any recovery from L&S for their share of costs will be recorded when received.
The first well (A3) has been drilled to a TD of 838 meters. The Bakken Sandstone came in at 718.5 meters
(Top) and is developed to 737.5 meters. The zone produced oil shows with substantial reservoir pressure
of approximately 1,200 psi, which was able to overcome the drilling mud liquid pressure. A service rig
perforated the zone from 719-733 meters with maximum shot density and deep penetration charges. The
results were inconclusive and the completion process may not proceed. The second well (A5) encountered
20+m of pay in a sand formation with excellent porosity (15-30%) and good permeability. This sand zone
is in the Mississippian Group of Sands. Petrostar has tested the A5 and is now evaluating the testing
results and it appears the well has an upper zone at 613-619 that should be evaluated. The Company will
consider the re-entry, perforating and fracing of this well during 2009 contingent upon current and future
price of oil and the capital market climate. Petrostar plans to maintain the PN&G rights and surface leases
where required on the assumption that with improving oil and gas prices the funding may become
available in the future to conduct the 2 re-entry programs to try and obtain commercial production from
these wells. A3/36 was dry and A5/4 well has yet to produce any significant oil. The company intends to
re-enter A5/4 during the summer of 2010 with the intent of getting the well into commercial production.
Bakken PN&G Leases, SE Saskatchewan and SW Manitoba
During late October and November 2008 the Company drilled and completed a well at 1-26-14-31-1 which
is not affiliated with the aforementioned JV but is the first well to be drilled on separate P&NG leases
acquired in SE Saskatchewan and SW Manitoba. The well has produced modest quantities of light oil from
an upper zone and production facilities have been installed. The Company will carry out further testing and
decide whether a directional drilling program is initiated if current testing results show that the formation
will be productive and that the current well is some meters of target and the additional expense will be
meritorious. The program is also contingent on the current and future price of oil and ongoing market
conditions. The company is currently evaluating this well and has placed it on pump with an intermittent
pumping schedule. A geological review indicates that the current zone is a favourable target for production
with an indication that the zone may have been perfed to high. A decision to re-enter and re-perf lower in
the zone will be made in the near future.