Cross Border Resources, Inc. (XBOR)

[SeaOhToo]

Info from Cano Petroleum.

Waterflood of the Cato Properties.

"Our 2010 Fiscal Year development capital plan includes expanding the waterflood footprint from 640 acres to approximately 1,000 acres by adding three new injection wells, which were put into service in the Current Quarter. We have identified a new source of water in a non-productive formation within our acreage, and have confirmed that each water well is capable of producing 2,500 to 3,000 barrels of water per day. This new water source formation has been penetrated in a number of existing wellbores in the Cato Properties and confirms the reservoir continuity necessary for the formation to be validated as a reliable water source for future expansion of the Cato waterflood. As we develop this new water source, we will be able to increase the waterflood footprint without decreasing the injection rate at our existing injectors. This should enable us to maintain production from existing producing wells at current levels. We averaged 14,000 barrels of water injection per day (“BWIPD”) during the quarter ended September 30, 2009. We experienced a decrease to 12,000 BWIPD during our Current Quarter as we measured increasing injection pressures in the northern part of the flood area and we were required, under our existing waterflood permit, to reduce the injection rate in these wells.

When the three new injection wells were activated during the latter portion of the Current Quarter, we were able to increase water injection to the southern portion of the flood. During January 2010, we increased the injection rate back to 14,000 BWIPD. Further development plans for Cato include behind-pipe recompletions, restoration of production from the Tom Tom and Tomahawk fields and the drilling of a deep Morrow formation test well. These development plans are contemplated to begin after the completion of the Merger.

Net production at the Cato Properties for the Current Quarter was 250 BOEPD, which was 50 BOEPD lower as compared to 300 BOEPD for the quarter ended September 30, 2009. The 50 BOEPD decrease resulted from the reduction of injected water and redistribution of water injection at the waterflood. We have applied for injection pressure increases on 21 wells with the New Mexico Oil and Gas Conservation Division and expect a decision in the March/April 2010 timeframe. A favorable decision would enable us to achieve increased injection rates up to 21,000 BWIPD (our current physical plant capacity). Net production at the Cato Properties for the Current Six Months was 275 BOEPD."