Projected 2006 Year End Proved Reserves

*123 wells drilled in 2006
-data as per the Q4 Operational Update

*108 of the 123 wells projected proved reserve "value creators"
-In Q2'06 C.C. CEO Rochford indicated that 107-110 value creators possible.

*Each of the 108 wells generates about 1.25 PUDs (Proved Undeveloped drilling locations.) By drilling 108 wells deemed value creators an additional 135 PUDs were generated.
-In Q2'06 C.C. CEO Rochford indicated that about 1.25 PUDs generated for each well drilled that was deemed a "value creator."
- Math: 108 X 1.25 = 135

*Credit of 45,000 BOE for each of the 135 PUDs generated.
-In Q2'06 C.C. CEO Rochford indicated that average production per well at F.M property should yield about 45,000 BOE. (Other properties assumed to yield similar results.)
-Math: 135wells X 45,000 BOE/well = 6,075,000 BOE oil

* ARD purchased property yielding 4,700,000 BOE oil.

* Increased drilling activity in 2006 in both KS and Permian Basin (San Andreas formation) should yield slightly more proved reserves of NG than was added in previous year.
-ARD should increase NG proved reserves by about 2,450,000 BOE as a result of Improved recovery and development.

Proved Reserve Increases:________________Oil________Gas
Improved Recovery & Development:......6,075,000........2,450,000
Purchases of Minerals in Place:............4,700,000.............0
Sub Total............................................10,775,000.......2,450,000

Less Production...................................923,900.........136,100
Total Proved Reserves Increase..........................................9,851,100.......2,313,900

Year End 2005 Proved Reserves............24,867,189.......5,330,346
Total Year End 2006 Proved Reserves.....34,718,289.......7,644,246

Total 2005 Year End oil and gas proved reserves were 30,197,535 BOE.
Total 2006 year end oil and gas proved reserves should be 42,362,535 BOE.

In conclusion FY2006 activities should increase proved reserves by 12,165,000 BOE or 40.2%. FY2006 proved reserves should yield 81.9% oil. This is down slightly from the 82.3% year end 2005 oil proved reserves. Anything less than a 40.2% increase in year end proved reserves to 42,362,535 BOE for FY2006 would be considered a disappointment.