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					RELIANCE OIL & GAS


Hammerhead Lease Prospect
   CORPORATE OVERVIEW

Reliance Oil and Gas, Inc. is an oil and gas drilling, operating and explora-
tion company, incorporated under the laws of the State of Texas on July 1,
1985. The company has in excess of $100,000,000 in proven oil and gas
reserves. The company is a fully licensed and bonded oil and gas driller
and operator in the State of Texas. The company is a full service drilling
and operating company, with two drilling rigs and two work over rigs in its
fleet, along with all the ancillary oilfield servicing equipment necessary to
be a full service driller and operator.The Company will conduct its drilling,
production, acquisition, development and exploration activities in areas
in which it is experienced and knowledgeable in the particular geological
basins and use that experience and knowledge to create strategic
alliances with qualified industry partners. The Company’s strategy will be
to increase its reserves and cash flow through drilling, production, explo-
ration and exploitation of its existing properties with proven reserves in
South Texas. The Company emphasizes the use of 2-D and 3-D seismic,
horizontal radial fracturing techniques, horizontal drilling techniques and
computer-aided exploration technology, together with geological and
engineering studies of its proposed properties to evaluate and prioritize
                                                                           -
drilling prospects and production efforts. The Company will focus
production and drilling activities on its properties in a relatively concen-
trated area to permit the Company to utilize its base of geological and
engineering experience in the region to maximize drilling success and to
minimize development costs. The Company plans to continue to selec-
tively pursue acquisitions of majority working interests and operating
rights in properties that offer developmental potential as well as provide
operating synergies with existing properties.



                                                                                RELIANCE
                                                1                               OIL & GAS
                                                                                      GA
RELIANCE
OIL & GAS                          HISTORY OF
                    GUADALUPE COUNTY

            Guadalupe County is ninety miles inland from the Gulf of Mexico in south central Texas
            and is bounded by Comal, Hays, Caldwell, Gonzales, Wilson, and Bexar counties. Cibolo
            Creek forms the border between Guadalupe and Bexar counties, and the San Marcos
            River separates Guadalupe and Caldwell counties. Seguin, the county seat and largest
            town, is on Interstate Highway 10 and U.S. Highway 90, twenty-five miles southwest of
            Austin and eighteen miles northeast of San Antonio.The county's center lies near Seguin
            at approximately 29°35' north latitude and 97°57' west longitude.The county covers 713
            square miles of flat to rolling terrain with local depressions and escarpments, and its
            elevation ranges from 450 to 800 feet above sea level.The northwestern section, near the
            border with Comal and Hays counties, is part of the Blackland Prairie; the rest of the
            county lies in the Upper Coastal Plain. Soil types vary from dark, calcareous clay in the
            northwest to fine, sandy loam in the southeast.Vegetation consists primarily of mesquite,
            scrub brush, and grasses in drier areas of the county, while water-tolerant hardwoods
            and conifers flourish near creeks. The area has a mild subtropical climate, with tempera-
            tures ranging from an average high of 96° in July and an average low of 42° in January.
            The annual rainfall in the county averages 33 inches, and the growing season averages
            275 days.


            The Guadalupe River was developed in the late 1920s and early 1930s as a source of
            hydroelectric power. A series of privately owned dams channelled water through gener-
            ating plants, providing electricity for the surrounding area. Lakes Dunlap and McQuee-
            ney, as well as several smaller lakes, were formed by the dams and have become popular
            recreational sites. Oil was discovered by H. H. Weinertqv in eastern Guadalupe County in
            the early 1920s (in the Darst Creek oilfield), and although the new industry in no way
            rivalled agriculture in its importance to the county's economy, it did provide some diver-
            sity. The Luling, Dunlap, Darst, and La Vernia fields were still active in the 1980s. In 1982
            wells in the county produced 1,693,730 barrels of crude oil and 976,823 cubic feet of gas.
            Although no war supply contracts or facility projects were assigned to Guadalupe
            County in the 1940s, the area did take part in the economic prosperity generated by
            World War II. Manufacturing establishments in the county more than doubled the
            number of their employees between 1940 and 1947. The per capita wage doubled as
            well. The county's proximity to San Antonio encouraged many residents to commute. In
            agriculture, emphasis continued to shift from cotton to grains and livestock as a part of
            the war effort.


                                          2
In the 1980s as much as 80 percent of the land in Guadalupe County was used
for farming and ranching. Among the primary crops were sorghum, hay, oats,
wheat, and corn; watermelon and peaches were also popular, and the county's
pecan production was sixth in the state. Over 70 percent of the county's agri-
cultural receipts in 1982 came from livestock and livestock products, mainly
cattle, hogs, poultry, and milk. Although agriculture continued to be a impor-
                                       -
tant aspect of the economy, farm receipts represented only 12 percent of the
county's annual income in 1985. Professional and related services, manufactur-
ing, and wholesale and retail trade involved nearly 60 percent of the work force
in 1982. Mineral resources, including ceramic clay, industrial sand, oil, gas, and
lignite coal, gave residents the opportunity to diversify their interests. In recent
years many people have moved to Guadalupe County from San Antonio,
choosing to live in Guadalupe County and work in Bexar. In 1982 46 percent of
the work force was employed outside the county. Between 1960 and 1980 the
population of Guadalupe County rose nearly 40 percent, from 29,017 to 46,708;
in 1990 the population was 64,873. Local attractions include Lake McQueeney,
touted as the "water ski capitol of Texas" and numerous historic homes and
buildings.


Guadalupe County                             Dunlap Field, Guadalupe County
Annual Totals, Jan 1993 - Apr 2007           Annual Totals, Jan 1993 - Apr 2007

Date Oil (BBL) Casinghead (MCF)               Date Oil (BBL) Casinghead (MCF)
1993   1,272,241               381,523        1993     85,101              148,050
1994   1,262,947               347,081        1994     68,238              124,205
1995   1,374,396               341,289        1995     77,532              126,010
1996   1,262,138               327,730        1996     85,769              119,230
1997   1,098,215               318,838        1997     95,690              142,049
1998   1,326,309               262,916        1998     75,828              125,218
1999     946,974               194,479        1999     64,978              106,771
2000     976,074               170,404        2000     68,202               85,650
2001     992,389               136,095        2001     65,186               76,467
2002     894,968               106,313        2002     59,688               63,919
2003   1,003,282                96,191        2003     52,546               54,763
2004   1,054,514                94,289        2004     53,275               52,926
2005   1,489,421                89,769        2005     53,850               53,234
2006   1,416,101                97,968        2006     50,095               53,642
2007     199,731                13,696        2007        7,520              7,912
Total 16,569,700             2,978,581        Total   963,498            1,340,046


                                                                                       RELIANCE
                                                      3                                OIL & GAS
                                                                                  RELIANCE OIL & GAS
                                                                                 Hammerhead Prospect
                                                                                Guadalupe County, Texas

                                                                                     Locator Map




                               Guadalupe County




                                                                                           LULING
                                                                                      90




                                                                           90




                                                                                     10




                                                                      10




                          90


 RELIANCE OIL & GAS
Perfetto Lease Prospect                        RELIANCE OIL & GAS
                                              Nelson Lease Prospect




                                         10




                                                       4                        RELIANCE OIL & GAS
  RELIANCE OIL & GAS                                                                       Dunlap Field Production History
 Hammerhead Prospect                                                   Historically the average well in the Dunlap field has had an IP of 50 BOPD.
Guadalupe County, Texas

 Dunlap Flat Field Map




                                                                             Glennwood Warnake
                                                                                 D. Tilley #3                                  90
                                                                                 IP 60 BOPD

                                    RELIANCE OIL & GAS
                                   Nelson Lease Prospect
                                                                                                         Glennwood Warnake
                                                                                                             D. Tilley #1
90                                                                                                           IP 47 BOPD

      RELIANCE OIL & GAS
     Perfetto Lease Prospect

                                                                         Glennwood Warnake
                                                                             D. Tilley #5
                                                                             IP 52 BOPD


                                                                                                                         10




                                                                                                                                         KEY

                          10                                                                                                  Oil Well
                                                                                                                              Gas Well
                                                                                                                              Dry Hole
                                                                                                                              Abandoned Oil Well
                                                                                                                              Abandoned Gas Well
                                                                                                                          IP = Initial Production

 *Based on reports from field personel                                                                                    BOPD = Barrels of Oil Per Day
  This diagram is for illustration purposes only and is not to scale           5
     RELIANCE OIL & GAS
    Hammerhead Prospect
   Guadalupe County, Texas

          Lease Map




                                                                        Glennwood Warnake
                                                                            D. Tilley #3
                                                                            IP 60 BOPD




                                   90

                              RELIANCE OIL & GAS
                             Nelson Lease Prospect
                                                                                                      Glennwood Warnake
                                                                                                          D. Tilley #1
                                                                                                          IP 47 BOPD




 RELIANCE OIL & GAS
Perfetto Lease Prospect

                                                         Glennwood Warnake
                                                             D. Tilley #5
                                                             IP 52 BOPD
                                                                                                              KEY

                                                                                                   Oil Well
                                                                                                   Gas Well
                                                                                                   Dry Hole
                                                                                                   Abandoned Oil Well
                                                                                                   Abandoned Gas Well
                                                                                               IP = Initial Production
                                                                                               BOPD = Barrels of Oil Per Day




                                                                                                                 10
RELIANCE OIL & GAS
                                                     6
                                                                This diagram is for illustration purposes only and is not to scale
                                                                                       RELIANCE OIL & GAS
                                                                                           Nelson Lease
              Glennwood Warnake                                Glennwood Warnake        Proposed Location   Glennwood Warnake
                  D. Tilley #5                                     D. Tilley #3                                 D. Tilley #1
                  IP 52 BOPD                                       IP 60 BOPD                                   IP 47 BOPD




1600’                                                                                                                              1600’




1700’                                                                                                                              1700’




1800’                                                                                                                              1800’




1900’                                                                                                                              1900’




2000’                                                                                                                              2000’




2100’                                                                                                                              2100’



2200’                                                                                                                              2200’




2300’                                                                                                                              2300’

2350’                                                                                                                              2350’

                                                                                                               RELIANCE OIL & GAS
                                                                                                              Hammerhead Prospect
                                                                                                             Guadalupe County, Texas
This diagram is for illustration purposes only and is not to scale                 7                        Well Log Cross Section Map
       RELIANCE OIL & GAS
      Hammerhead Prospect
     Guadalupe County, Texas

             3-D Schematic

                                                                         RELIANCE OIL & GAS
                                                                          Proposed Location




This diagram is for illustration purposes only and is not to scale   8
        THE ADVANTAGES OF
       HORIZONTAL DRILLING


Horizontal wells have a higher productivity and pay contact per well than verti-
cal wells, thereby reducing the number of wells required to drain the reservoir.
Horizontal wells allow operators to take advantage of highly heterogeneous or
layered reservoirs, reservoirs with fractures, or water or gas coning problems.
Horizontal wells are a controlled, directional completion technique for exploit-
ing un-recovered mobile hydrocarbons in existing fields. These reserves usually
remain because the reservoir’s heterogeneity has prevented efficient develop-
ment using vertical wells. The primary screening tool is recovery efficiency as
measured by the percentage recovered of original oil-in-place (OOIP) or original
gas-in-place (OGIP). Screening is carried out by reservoir characterization,
followed by reservoir stimulation.

The advantages of horizontal wells include higher productivity and a larger
drainage area per well. In Texas and Louisiana, horizontal wells in the Austin
Chalk have become attractive because of the relatively rapid payout from good
initial production rates. The best technique currently available utilizes coiled-
tubing drilling, since it minimizes problems. As a result, some drilling costs may
ultimately be reduced.

The average estimated ultimate oil and gas recovery of horizontal wells in the
Austin Chalk, based on the normalized profiles range from a low of 40,000 BOE
per well to 300,000 BOE .

                                      Paul Gerlach, Kansas Geological Survey
                                      University of Kansas Energy Research Center



Horizontal radial jet completion technology can horizontally drill a well bore in
a “wheel and spoke like fashion” and penetrate up to 90 feet with each spoke.
The technology has the ability to horizontally drill up to eight spokes in one well
in only two days, as opposed to a conventionally drilled horizontal well bore
going the same distance but taking up to four weeks.

Reliance Oil and Gas, inc. believes by using the new horizontal radial jet
completion technology verses conventional vertical drilling to exploit their
proven oil reserves on the Hammerhead Prospect they should see a substantial
increase in not only the daily oil production but the total recoverable oil in the
reservoir as well.



                                                                                      RELIANCE
                                                    9                                 OIL & GAS
RELIANCE OIL & GAS

Turning OIL & GAS FLOW
        into CASH FLOW



     1873 N. Magnolia St.
      Luling, Tx. 78648

      Tel: 214-553-1608
      Fax: 214-553-1609

           Toll Free
  1-866-OIL-WELL {645-9355}
  1-866-GAS-WELL {427-9355}

				
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