Pegasi Energy Resources Corp.(fka PGSI)

[Timothy Smith]

Pegasi Energy Resources Raises $4 Million in Private Placement

Pegasi Energy Resources Corp. (OTCBB:PGSI) ("Pegasi" or the "Company"), an East Texas based oil and gas exploration and production company headquartered in Tyler, Texas, today announced the closing on September 10, 2012 of a private placement to investors of securities raising approximately $4 million in gross proceeds.

In connection with the closing, the Company issued a total of 3,342,390 units (the "Units"), each unit consisted of two shares of the Company's common stock and a warrant to purchase one share of the Company's common stock, exercisable for three years at a price of $1.00 per share. Investors purchased investment units priced at $1.20. The proceeds from the offering will be used in developing the Company's Cornerstone Project in East Texas.

The Company's recently completed Morse #1-H was the first horizontal well to be drilled in the mature Rodessa oil field. Following the success of the Morse #1-H, the Company now plans to drill horizontal wells with longer lateral sections and involving more frack stages to develop the oil and gas reserves of relatively untapped tight-oil formations.

Mr. Michael Neufeld, President and CEO of Pegasi said: "We are pleased with the success of this offering. These funds will help us to fulfill the Company's drilling plans and realize the potential of the significant oil resources in the Cornerstone Project Area, where we now hold approximately 30,205 gross acres."