NEW ALBANY SHALE BACKGROUND

According to the Illinois Basin Consortium, which is comprised of the Illinois, Indiana and Kentucky Geologic Surveys and Gas Research Institute, the New Albany Shale in the Illinois Basin encompasses some 53,000 square miles and is estimated to contain 86 trillion cubic feet  (Tcf ) of gas. Gas has been produced from the New Albany Shale since 1858, from at least 40 fields in Kentucky, 19 in Indiana, and 1 in Illinois. To date, more than 600  wells have been drilled into the New Albany Shale in  the Illinois Basin - principally in southern Indiana and western Kentucky. The Illinois Basin remains largely undeveloped due to poorly developed pipeline infrastructure  and, until very recently, public policy that  permitted meaningful gas production data to remain obscure from public inspection.  However, changes in public policy and higher gas prices have  spurred a renewed interest in Shale development in the basin.  KNG's core assets are situated at the southeastern tip of the Illinois Basin in an area referred to as the Rough Creek Fault Zone.   Shale  in this area is extensively fractured by proximity to the Rough Creek Fault System -the  largest fault system in the Eastern Interior United States.

Source: GRI-92/0391, Illinois Basin Studies 2