Sharon Energy (fka sheyf)

[Bobwins]

Talked with Kip Ferguson, CEO, today. I asked if the shutdown of Hancock #2 and opening the upper zones was a negative. He said no. They drilled #2 to test the lower zones that weren't reached by Hancock#1. He said they didn't want to miss the upper zones either so they were right next to the fault. He was very happy with the production they got. They will now test the other lower zones and comingle the output.

Said they needed to be faster with testing the zones. Taken a year to test the zones in Hancock 1. Many zones. I think he said including the lower zones, there were 18. He said the drilling by another company on adjacent property is competing with Hancock on the lower zones but not the original upper zones.

They are building the processing facility at Hound Dog #2 to handle up to 20,000mcfpd. Will probably start out at 12 or 13K but has expansion capability. Building it before the well is tested indicates their confidence in a commercial well.

Says that Diaz announcement that they will drill NW Speaks this year is probably not going to happen. They only have one drilling rig. They get the rig back on 7/1 to spud the third Hancock well, then HD#3 will spud in October and that means NW Speaks would likely be 1/07. Diaz doesn't understand how hard it is to get the type of top drive rig capable of 20,000 feet. Diaz is drilling shallow ngas wells in Canada and there are enough, especially after a warm winter when the fleet wasn't able to get out into many restricted areas due to the warm weather.

He also commented that he is hearing rumblings that the drilling fleet isn't as booked as they have indicated publicly. They want two year commitments for their existing rigs. Kip says he is expecting 160 new rigs to come on the market this summer and he thinks the drillers are not going to have customers for them. He thinks the exploration companies don't have sufficient deep drilling prospects. The bigger companies don't have the drilling inventory to keep the deep rigs busy. He has turned down subpar rigs that wanted a premium. He says he would rather wait until the new rigs come on the market and he has more bargaining power.

Really very optimistic due to the multiple drilling opportunities in Hancock and Hound Dog.

Asked about shares coming on the market. He said that 's true about 5/6/06. But he says there will be good news in May. Hancock #2 should be done testing and back online. Hound Dog 2 results will be published in May and the annual report will be done in May. There would probably be a drilling update in July. Should help soak up shares but there were 8 million shares in the private placement and Diaz only controls 2.5 million. Also Sharon doesn't trade that much. So Ed Ajootian could be right about the price fading into the 50's.

I still think HD#2 will give them a boost because it will be verification that they have multiple drilling opportunities at both Hancock and Hound Dog. 5,000mcpd is a good sized well for either US or Canada. If HD is bigger, it will attract notice.

Bob