ReoStar Energy Corp (REOS)

[redwards]

SECTION 2 - FINANCIAL INFORMATION

Item 2.01 Completion of Acquisition or Disposition of Assets.

The registrant sold its thirty percent (30%) interest in the Tri-County Gas Gathering System (TCGGS) on June 6, 2007 to Cimmarron Gathering LP, an indirect wholly-owned subsidiary of Copano Energy, L.L.C. (NASDAQ: CPNO), for $15 million in an all cash transaction. TCGGS is a gas gathering partnership that consists of approximately 50 miles of pipeline, compression and a carbon-dioxide plant that services portions of Cooke and Montague Counties in north Texas. The effective date of the transaction for accounting purposes was April 30th, 2007; however, the contract for purchase was executed, closed and funded on June 6, 2007.

There is no material relationship with the purchaser other than in respect of the transaction between such person(s) and the registrant or any of its affiliates, or any director or officer of the registrant, or any associate of any such director or officer.

The registrant received approximately $12.5 million in cash with $2.5 million dollars remaining in escrow for 180 days to settle any subsequent title claims that might arise and cash calls owed through the effective date of April 30th, 2007, which are estimated at $900,000.

SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(a) Exhibits

Exhibit 16.1 Purchase Sale Agreement with Cimmarron Gathering, LP.