Acquisition
TrueStar Petroleum Corporation is the sole managing member of Trinity Barnett LLC, formed to facilitate the acquisition and operation of the oil and gas assets in the Newark East Gas Field in Texas from Eagle Oil & Gas Co. On August 23, 2004 , the Company closed on the acquisition of certain producing and non-producing oil and gas assets  in the Newark East Gas Field in Denton and Tarrant counties, Texas from Eagle Oil & Gas Co. The initial purchase price effective March 1, 2004, was US$14,002,000 plus adjustments for capital expenditures, revenues, expenses, and hydrocarbon inventory over the period commencing March 1, 2004 and ending on the date of closing. As of the closing date of August 23, 2004, the adjusted purchase price was approximately $20,645,476.

The acquisition covered certain producing and non-producing leasehold interests covering approximately 3,200 mineral acres, including surface facilities, gathering systems, 19 producing vertical gas wells, 8 producing horizontal gas wells, and the right to drill up to 4 additional developmental gas wells in the Newark East Gas Field in Denton and Tarrant counties, Texas. 

TrueStar Petroleum Corporation has therefore acquired Proved Reserves estimated by third party appraisal to be 21.6 billion Cubic Feet of gas with an additional estimated 15.7 billion Cubic Feet of gas of Probable Reserves. Probable Reserves in the Barnett Shale fairway carry a similar probability of success (90%) as Proved Reserves due to the blanket nature of the formation and the low-risk drilling environment.

The interests to be acquired herein are subject to both an Area of Mutual Interest Agreement and Joint Operating Agreement. At present, approximately one well a month is being drilled and completed under the Joint Operating Agreement. This pace is likely to quicken in the near future.

Trinity also plans to acquire additional leasehold interests for drilling through an aggressive acquisition effort in Denton and Tarrant Counties (Texas), staying within the main fairway.

Overview
Barnett Shale is a giant gas field in the southern USA that is currently the focus of intensive exploration. 50 operators have drilled 3,500 wells in the Fort Worth Basin alone. The Barnett site is the largest producing gas field in Texas. The gas play area is now geographically moving south and west into numerous adjoining counties, although the main fairway remains Denton and Tarrant Counties for geologic reasons. The commercially productive area covers 600 square miles in Wise, Denton and Tarrant counties.

The Barnett Shale is estimated to have a trillion cubic feet of natural gas every 7 square miles. The average gas in place in the Barnett Shale is 160 billion cubic feet of gas per square mile. The expanded play now has well over 2,000 successful commercial wells with very few disappointments and marginal wells, attributable to the low-risk, blanket nature of the productive formation. Driven by technological advances in fracturing techniques and horizontal drilling, natural gas production from the Barnett Shale has now reached levels exceeding 900m cubic feet per day.

Barnett Shale Geology
The Barnett Shale hydrocarbon system is one of the 10 organically richest in the world due to the massive organic matter deposited in this geologic setting. It is the source rock for the entire Fort Worth Basin. This large, geologically continuous gas accumulation occupies a structurally low position straddling the Basin axis. The accumulation is characterized by the presence of gas downdip from water saturated rocks, no obvious lithologic or structural barrier (that separate the updip water and downdip gas), very low matrix permeability, and the absence of truly dry holes.

The productive reservoir is the secondary porosity and permeability that results from the expansion of gas in the shale as the source rock geologically moves down through the hydrocarbon generation window over time. The expansion 'shatters' the dry shale thus enhancing the primary low matrix permeability.

Extraction Technology
Barnett production is controlled by the formation's thickness, which ranges from 50 feet on the Bend Arch to close to 1,000 feet out in front of the Munster Arch in the basin's centre. The Barnett Shale is approximately 600 feet thick near the centre of the present producing trend. Most wells are completed in the lower part of the Barnett Shale with perforations typically spanning 200 to 300 feet.

Necessary for a successful Barnett Shale completion is the presence of the underlying Viola Simpson Limestone. Average permeability is in the nano-darcies and porosity averages between 5 and 6 percent. Matrix permeability is nil, but there may be permeability along the fractures. The typical fracture stimulation today consists of a million gallons of water and 50,000 pounds of sand to create a theoretical zone of fracturing that is about 1,500 feet long in both directions, for a total length of 3,000 feet.

Average cumulative production from the initial fracture stimulation is 1.25 billion cubic feet of gas per well. The wells initially produce for about 1m cubic feet of gas per day but experience a 50% decline in the first year. Then the wells stabilize and produce for an average 20 years, with expected life in excess of 30 years. Re-facing a well after 5 years or so of production can add another three quarters of a billion cubic feet of gas to a well's overall production.

Since September 2002, the industry has moved to horizontal drilling techniques coupled with slick water fracture stimulation techniques. In general, horizontal drilling has resulted in significant and material improvements in initial production rates over vertical wells (300-400%) with only a 40-50% increase in drilling costs. Ultimate expected recoveries have improved due to the flattening of the vertical well hyperbolic decline curve, to a much flatter exponential decline curve. Ultimate expected recoveries are anticipated to be in the range of 3-5 Bcf per well over the 30-40 year anticipated productive life, which should include initial fracture stimulation and at least one re-frac.

Standard operating procedure has now evolved to re-frac the older, vertical wells when production declines below certain thresholds. The same operating procedure, which has been highly successful in vertical wells, is expected to yield comparable results in horizontal wells in the future.