DALECO RESOURCES CORPORATION
Oil and Gas Division

General

Daleco Resources Corporation ("Daleco") has been engaged in the exploration, development and production of oil and gas properties in the United States since 1978. Daleco, through its wholly owned subsidiaries, Westland Resources Corporation, DRI Operating Company, and Deven Resources, Inc., owns and operates oil and gas properties in the States of Texas, West Virginia and the Commonwealth of Pennsylvania. Daleco does not refine any crude oil or market, at retail, any oil or petroleum products. All of Daleco's drilling activities are performed by independent drilling contractors on a contract basis.

An annual report of Daleco's oil and gas reserves is prepared by certified independent petroleum engineers.

Texas and Oklahoma

As of March 31, 2008, Westlands Resources has interests in 26 vertical and horizontal wells that produce from the Austin Chalk formation in east Texas. Westlands Resources operates 25 of the Texas wells.

The Austin Chalk is a naturally fractured, chalky limestone of Cretaceous age. In the mid to late 1980's, many horizontal drilling techniques were developed and perfected in this trend. Now, these techniques are being utilized throughout the world. The company has drilled several successful horizontal wells in the Austin Chalk. The fractured nature of the Austin Chalk lends itself to horizontal drilling because the horizontal well can intersect many fractures in the producing section of the formation, which in most of the wells in Burleson County is between 8,000' and 9,000'.

Westlands Resources has several proved undeveloped locations in the Austin Chalk. These development wells would be drilled as horizontal wells offsetting existing wells.

Appalachian Basin

As of March 31, 2008, DRI Operating Company operates and/or has interests in six wells in the States of West Virginia and Pennsylvania. Four of the wells, two in West Virginia and two in Pennsylvania, are producing from the Lower Devonian-aged Oriskany Sandstone at depths between 8,000' and 9,000'. The remaining two wells are located in Pennsylvania and produce from the Balltown formation at a depth of approximately 3,550'.

Alabama

Deven Resources, Inc. ("DRI") is the general partner of Deerlick Creek Royalty Partners, a limited partnership, owning overriding royalty interests in wells located within the Deerlick Coalbed Methane Field near Tuscaloosa Alabama. Coal bed methane (CBM) is simply occluded methane found in coal seams. Methane (CH4) is usually the primary component of natural gas. CBM is produced by non-traditional production methods, but it is sold and used the same as traditional natural gas.

Throughout its history, DRI has owned and/or operated coalbed methane wells in Alabama and Pennsylvania.

Oil and Gas Acreage

The following tables set forth certain information as of September 30, 2007:
  Gross Acres Net Acres
Developed
Acreage
2007 2006 2007 2006
Texas 3,550 4,357 1,259 771
Pennsylvania 1,280 1,280 1,280 1,280
West Virginia 2,480 2,480 693 693
Oklahoma - 1,300 - 244
Total 7,310 9,416 3,232 2,825
  Gross Acres Net Acres
Undeveloped
Acreage
2007 2006 2007 2006
Texas 1,519 1,519 554 554
Pennsylvania 6,087 6,087 6,087 6,087
West Virginia 2,997 2,997 920 920
Oklahoma - 1,120 - 43
Total 10,603 11,723 7,561 7,604
 

Oil & Gas



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