Production & Reserves

Overview

Tri-Valley retained the services of Cecil Engineering, an independent engineer qualified to estimate according to SEC criteria, to estimate our net share of proved developed oil and gas reserves on all of our oil and gas properties at December 31, 2007 for SEC filing. The SEC does not include any undeveloped reserves in these reserve studies. Thus, only proved developed reserves are listed in our reserve report. However, the industry historically operates on very different criteria when evaluating properties for investment. From that vantage point, Tri-Valley there is substantially more upside in its properties, although that has yet to be proved. As more wells are drilled and put on production, Tri-Valley expects both production and reportable reserves to increase significantly.

Price is a material factor in our stated reserves, because higher prices permit relatively higher-cost reserves to be produced economically. Higher prices generally permit longer recovery, hence larger reserves at higher values. Conversely, lower prices generally limit recovery to lower-cost reserves, hence smaller reserves. The process of estimating oil and gas reserve quantities is inherently imprecise. Ascribing monetary values to those reserves, therefore, yields imprecise estimated data at best.

Using year-end oil and gas prices and current levels of lease operating expenses, the estimated present value of the future net revenue to be derived from our proved developed and undeveloped oil and gas reserves, discounted at 10%, was $12,324,390 at December 31, 2007, $6,121,295 at December 31, 2006, and $7,056,072 at December 31, 2005.  The unaudited supplemental information attached to the consolidated financial statements provides more information on oil and gas reserves and estimated values.

Oil Production
The following table sets forth the net quantities of crude oil that we produced during:

2007 Oil (BBL)  7,006
2006 Oil (BBL)  6,600
2005 Oil (BBL)  17

Oil Reserves
Our estimated future net recoverable oil reserves from proved developed properties as of December 31, 2007, 2006, and 2005 were as follows:

December 31, 2007 Oil (BBL)  372,048
December 31, 2006 Oil (BBL)  275,452
December 31, 2005 Oil (BBL)  154,673