The Southeast Lost Hills Project (50% interest), San Joaquin Basin, California

The Southeast Lost Hills Project (SELH)is located in the San Joaquin Basin,
in the southern part of California (inland and north of Los Angeles). Within this project, Solimar Energy has a 50% interest in the Block B lease, including
the Jack Hamar wells: 1-13; 2-13; 3-13; 1-12; and associated uncompleted pipeline infrastructure.

The Southeast Lost Hills project is located along the southern flank of the large Lost Hills Anticline. The Lost Hills structure is a hugely prolific feature that has already produced in excess of 400 million barrels of oil equivalent (“MMboe”) to date to the north of the Jack Hamar play.

Southeast Lost Hills is a combination structural stratigraphic trap. The reservoir targets are shallow Pliocene sands that pinch out around the flanks of the Lost Hills Anticline. Seismic amplitude anomalies are associated with the presence of  hydrocarbons. This is a shallow play, with target depths of not greater than 4,000 feet. These shallow wells have been drilled on the northern end of the block. All wells encountered hydrocarbon shows in the Pliocene section, however, testing results over the past years have been inconclusive and hence the commerciality

of the shallow section is yet to be proven.

The first well tested in December 2007, Jack Hamar 3-13, flowed gas at 633,000 cubic feet per day over a 48 hour testing period at a tubing pressure of 1,185 psi on a 6/64 inch choke.  Subsequently, an independent reservoir engineering company, Resources Services, estimated that the recoverable gas basedon flow tests and reservoir performance for only this well is between 0.20 to 0.70 BCF of gas.

The three other wells on the SELH gas accumulation, Jack Hamar 1-13, 2-13 and 1-12, were tested in the first quarter of calendar 2008.  To date, no commercial production rates have been achieved by these wells due to formation problems.  Solimar Energy is planning to conduct a Clay Stay/Acidizing procedure on certain wells in an attempt to stablise the clay production problem which could possibly lead to the production of commerical quantities of gas from these wells.

Solimar is evaluating seismic data over the SELH area with a view to delineating other drilling prospects and is expecting to commence a new exploration program at SELH at the beginning of 2009.

Gas Sales Agreement

On 6 June 2008, Solimar Energy announced that the SELH Joint Venture had executed a Gas Sales Agreement ('the Agreement') with a major Californian oil an gas company to buy all the gas produced from the SELH Project. The Agreement involves the sale of gas from the Jack Hamar 3-13 well.  Initial production from this well is expected to be between 300,000 to 400,000 cubic feet per day.

Solimar Energy is nearing completion of a short section of pipe to the buyer's pipeline which it acquired with its rights to the SELH Project.