Verona Development Corp. - Gainsborough South Project

Gainsborough South Project China Projects Shiloubei CBM Project

The Gainsborough South property comprises a quarter section of Freehold acreage adjacent to the Gainsborough Frobisher-Alida pool located in southeast Saskatchewan approximately 20 kilometres from the border of the United States of America and approximately 10 kilometres from the border of Manitoba.

The primary producing zone in the Gainsborough area is the Frobisher-Aldia formation, an oolitic limestone unit exhibiting excellent reservoir qualities and well developed in the region. One well drilled on the property in 1967 produced for five months before being abandoned at 12 BOE/d and a 92 percent water cut. Wells drilled on adjacent grounds have produced substantial reserves. The property offsets a well drilled in 1997 that initially produced at 100 BOE/d and has had consistent production with a stable water cut of 97-98 percent since being drilled. Cumulative production to date is reportedly approximately 100,000 standard barrels.

Fig. 1 Stratigraphic chart of the Mississippian showing the Frobisher Alida reservoir

To date two wells have been drilled based on the interpretation of 3D seismic testing. The first well, 1B2-28-2-30W1M, commenced production on October 2007 and through January 2008 has produced 13,901 BOE (151 BOE/d average). The second well, 2D9-21-3A1-21-2-30, commenced production December 2007, with initial production of 204 barrels of oil equivalent per day (BOE/d) with a 75% water cut and current production to date is 4,468 BOE (149 BOE/d average).

Current costs averaged 7.88 per barrel of oil. The Company's investment will be paid back in less than one year.

Increased production is currently being facilitated by the operator to tie in production through to Strand's Gainsborough Battery located at 13-31-2-30-W1M which will increase daily production to 200 BOED per well. 3D seismic has also identified 4 additional sites being targeted for drilling.