Our Strengths

We believe that the following strengths provide us with significant competitive advantages:

* Leading acreage position in highly active East Texas Cotton Valley trend. The Company's 20,000+ gross (14,000+ net) acreage position in the Cornerstone Project area make it one of only a few entities to have effectively amassed large contiguous acreage blocks in this highly fragmented region. Larger independent operators have become increasingly active in acquiring acreage in the region over the past few years.

* Established production and proved reserves in a high quality basin. Pegasi has drilled five producing wells and has established a proved reserve base in the Rodessa field region with 21.4 bcfe of gross reserves and 1,166 mmcfe of current gross daily production. Through its recent drilling, workover and production activity, Pegasi's management team has continued to enhance its technical expertise in the region. The Rodessa field has large volumes of hydrocarbons in place in multiple geologic horizons. Fields of this type often have a significant number of potential drilling prospects with well-established long-lived production histories. We believe that our current acreage position, our ability to acquire additional acreage, and our management teams' extensive experience in the region provide us with a strong platform to further grow our reserves and production.

* Significant drilling inventory and long-term growth potential. Pegasi has identified 109 locations on its present acreage position. Currently, we are preparing plans for drilling the initial 10 wells beginning immediately upon completion of this Offering. Pegasi intends to use the latest in drilling and completion technologies, including horizontal drilling techniques, in order to maximize the recovery of oil and gas on its leasehold. These horizontal wells will target the Bossier oil formation and are expected to yield significantly higher hydrocarbon flow rates than the Company's lower-risk vertical wells. We believe that the continued exploitation and development of our properties will allow us to increase our proved reserves and our average net daily production even if we do not make additional acquisitions

* Significant infrastructure in place. Pegasi has a significant infrastructure in place including a 40-mile pipeline, an established gathering system, and a salt water disposal plant, all of which contribute to maximizing cash flow. Pegasi has ready access to several interstate pipelines and local end uses.

* Experienced, proven management and operations team. The members of our management team have an average of over 30 years of experience in the oil and natural gas industry with specific experience in East Texas. We believe that our experience and knowledge of East Texas and more specifically the Cornerstone Project area is an important competitive advantage for us.

* Access to proprietary deal flow. We expect to have access to additional acquisition and leasing opportunities due to our expertise in the area and strong industry contacts.