First Quarter Activities

Three of the four wells tied in during first quarter of 2009 came on-stream before March 31, 2009 adding joint natural gas volumes of about 2.4 mmcf per day gross (0.9 mmcf per day net), and natural gas liquids, allowing Open Range Energy to increase quarterly production by 28% from the first quarter of 2008 average. The tie-in of the fourth well (100% working interest) was deliberately delayed to early April 2009 to take advantage of the one-year royalty incentive program announced by the Alberta government on March 3, 2009.

The focus of the quarter was drilling the company’s first horizontal well at Ansell/Sundance, targeting the Bluesky, which in this area lies at about 2,800 meters depth. As earlier detailed, the company’s objective is to achieve a bulk shift in the economics of Deep basin development by drilling horizontally through this thick, extensive reservoir, which includes areas of permeable course shore face sands that can deliver prolific rates of production. With a total measured depth of over 4,000 meters, the company Bluesky horizontal test qualified for above $2.8 million in Alberta deep gas royalty credits. The well spudded in January 2009, was drilled with a 900-meter horizontal leg and was cased in February 2009. As earlier reported the well experienced mechanical problems during hydraulic fracturing, and a section of collapsed casing in the well’s build or curved section has been identified.

Open Range Energy plans to initiate repairs as soon as possible after spring break-up, in late May 2009 or early June 2009. The company remain optimistic that repairs will be successful and that we can fracture the remaining six of the eight planned fractures and move to well testing. An increasing number of area operators are reporting strong success with multiple-stage fractured horizontal wells in Deep basin cretaceous targets, including the Cadomin, Notikewin and Bluesky.

Financial Matters

Open Range Energy exited the first quarter with a total of $32 million drawn on its bank lines of $54 million. The company’s capital program being weighted to the first quarter of 2009, the company plans to direct a majority of cash flow from operations towards the repayment of debt during the rest of 2009. Important for retaining financial flexibility was the renewal of the company’s bank lines with no reduction in overall borrowing capacity despite weakening commodity prices. This was confirmed subsequent to the end of the quarter, in late April, and reflected Open Range Energy’s strong growth in net asset value ($6.70 per share based on proved plus probable reserves discounted at 10%) and reserves in 2008.

Under the company’s current 2009 average natural gas price outlook of $4.50 per mcf at AECO, it is predicting funds from operations of about $13-15 million for 2009. This means the company will borrow only modest net bonus amounts to finance this year’s capital program, which stays at $18 million, of which $13 million was expended during the first quarter of 2009.

Having reacted early to last fall’s market instability and commodity price declines, Open Range Energy moves on to have solid financial and operational positioning to weather the downturn, based on:

— A strong balance sheet with moderate debt;

— New price hedges placed over the past several months. At present the company has 7.4 mmcf per day hedged with a floor price of about $4.63 per mcf and a ceiling of about $6.87 per mcf over the balance of the year, or about 45% to 50% of the company’s estimated production. The floor price is about $1.00 per mcf above current spot prices and provides solid downside protection to the company’s’ cash flow;

– Low operating costs of about $6-7 per boe of production, reflecting the high quality of our Ansell/Sundance production. The company’s low cost structure is a major advantage at current commodity prices;

– Continued competitive netbacks on our natural gas and NGL production;

– A conservative capital budget of $18 million, the majority of which will be funded by cash flow; and

– Continued annual production growth thanks to recent well tie-ins and low declines on established wells, with average volumes presently forecast to grow by about 15% year-over-year, to 2,400 boe per day.

Second Quarter Outlook

The fourth of the well tie-ins conducted at Ansell/Sundance in the first quarter came on-stream early in the second quarter. This was six to 25 exploratory well (100% working interest) in southern Ansell/Sundance. Its results were very strong, testing at around 3 mmcf per day from five zones. It was tied into a third-party facility, brought on-stream in April 2009 to take advantage of recently introduced royalty relief, and is currently producing at a restricted rate of about 0.7 mmcf per day. This leaves productivity behind-pipe for future tie-in to the company’s own facilities when natural gas prices warrant.

Second quarter capital spending will be targeted at undertaking repairs and subsequent completion operations on the Bluesky horizontal well. We have been notified that the third-party gas plant that processes a portion of our Ansell/Sundance production will be down for two to three weeks, which is expected to affect the Open Range compressor station and shut-in up to 2.9 mmcf per day net for that period. Second quarter production should average in the range of 2,200-2,300 boe per day.